Benin report - Institut Africain de la Gouvernance

CHAPTER FIVE: CORPORATE GOVERNANCE__________________________________________________________________________since they face difficulties in dealing with the formal banking system. In turn,this self-rationing could be due to:the formalities required for dealing with banks, especially recourse to anexternal auditor to audit accounts;financing costs: on average, the real interest rate for bank loans is 10.9% inthe manufacturing sector; andrequired guarantees: the value of the required guarantees represents onaverage 126% of the value of the credit. For several people who met withthe CRM, the bank guarantees demanded are often unrealistic. Thisproblem of guarantees is all the more serious because land ownershiprights in Benin are a thorny issue, and several enterprises tend to markdown their initial capital in order to minimise the business licence fee thatthey have to pay even before starting their business.589. Other private sector representatives were highly critical of the banking sector.In fact, with regard to the solidity of the sector, although the BCEAO requiresthat 60% of bank commitments be taken on enterprises whose accounts areaudited and rated by it, the percentage of enterprises of Benin‟s formal sectorin this situation does not exceed 30%. Furthermore, banks in Benin arecriticised for limiting themselves to financing commercial or short-termtransactions and managing deposits, and for failing to encourage investments.Accordingly, they demand that 30% of the investment amount be blockedbefore they can assist a potential businessperson. International banks, for theirpart, finance mostly foreign enterprises.590. The CRM also noted that banks in Benin lagged behind in the development oftraditional means of payment (especially the use of cheques) and electronicbanking. Thus, enterprises whose water or electricity bills exceed 100,000CFA franc are required to pay by certified cheque, which often entails that aworker is assigned for the whole day to this operation, which costs 2,000 CFAfranc. The increasingly less frequent use of cheques in commercialtransactions is due to a lack of trust in this payment instrument.Representatives of the National Investors‟ Council of Benin (CNIB) deploredthe fact that fund transfers between a Benin-based bank and another based inNigeria take six times longer, because Nigeria refuses paper clearance. The feededucted by banks in Benin for this service is 2%, and a possible accelerationof the procedure would cost the client enterprise 5%. Even though banks claimto have invested in the development of their internal information systems,electronic banking is still in its infancy and the parallel exchange market isfairly well developed.591. Micro-finance. Despite their over-liquidity, the primary banks of Benin donot seem to be equipped to offer adequate services to SMEs, and especially toinformal sector enterprises. They mainly finance large local enterprises.Consequently, the share of primary banks‟ financing of the private sector fellfrom 54.65 billion CFA franc in 2001 to 19.29 billion CFA franc in 2004. Thiscan be compared to the financing granted by MFIs, whose operations in favour206