Congo's banking sector set for two flat years after fast growth

By Aaron Ross KINSHASA (Reuters) - Democratic Republic of Congo’s banking sector, which grew 14-fold over the last decade, faces two years of stagnation due to low commodity prices and concern over political instability, the president of the banking association said. Having started from one of the world's lowest banking participation rates, banking assets in Congo, home to over 65 million people, rose from around $300 million in 2002 to more than $4 billion at the end of 2013, as a degree of stability emerged in a post-war economy. However, Congo faces a turbulent run-up to elections due in 2016, when President Joseph Kabila is meant to stand down. Congo vies with Zambia as Africa’s top copper producer, but has seen prices of the metal fall some 17 percent in the last year. "In the next two years, nothing will happen. We will just try to manage the existing situation," Michel Losembe, president of the banking association and CEO of Congo’s third-largest bank, BIAC, told Reuters. A decision by the government in 2011 to pay public servants through the banking system was a major catalyst, leading to the establishment of hundreds of thousands of new accounts. Losembe said that after growing by 35 percent in 2012, Congo's banking sector expanded by 12 percent in 2014, below the rate he would expect given the overall economy's growth of 9.5 percent last year and a forecast 10.4 percent for 2015. "I’m afraid in 2015 the growth of the banking sector will be below the GDP growth," he said. "We should still be able to grow in multiples of the GDP growth because we’re growing from so small." Congo's copper output rose more than 12 percent to a record 1.03 million tonnes in 2014. The nation also has abundant reserves of gold, diamonds and tin. But Losembe said low commodity prices were curbing investment in new projects. Almost a decade on from Congo's first free elections in 40 years, most of the former Belgian colony's major conflicts have ended, although operations are still underway against Rwandan Hutu rebels holding out in the eastern hills. The next presidential vote, due on Nov. 27, could usher in the central African country's first peaceful transition of power since independence in 1960. However, the capital Kinshasa was paralysed by days of protests in January, fired by suspicions that President Joseph Kabila, who took over after his father was assassinated in 2001 and won elections in 2006 and 2011, may try to extend his time in power. At least 40 people died in the violence and a number of shops, mainly Indian- and Chinese-owned, were looted. Losembe said banks had not yet experienced a reduction in deposits or transactions, but the political uncertainty served as a stark reminder of Congo's risks. "One thing is sure, everyone is worried. And when people are worried, they invest less," he said. But Losembe remained positive on longer-term prospects. "If we succeed in these elections in 2016, then we will see a lot of things happening," he said. "Companies will be investing like crazy." Follow Reuters Summits on Twitter @Reuters_Summits (Editing by David Lewis and David Holmes)