Liberia - Banking Systems Liberia - Banking
Although key financial indicators show that the banking sector is sound, non-performing loans (NPLs) and poor earnings remain major challenges. The percentage of non-performing loans (NPLs) to total loans increased from 11.8 percent in 2016 to 13.6 percent in 2017. The CBL, in collaboration with the Liberia Bankers Association and commercial banks, has attempted to address this situation by “naming and shaming” delinquent borrowers and barring noncompliant borrowers from accessing future financial services. While financial institutions allocate credit on market terms to foreign and domestic investors, the historically high rate of NPLs has led banks limit credit to short-term (less than 18 months), high-interest rate (12-20 percent) loans. This constrains capital investment and limits new business development. Generally, banks rely on fees and interest charged for transactions and services such as fund transfers, deposits and withdrawals, checks, and letters of credit. Few banks offer modern digital financial products and services, including ATMs, point of sale (POS) terminals, electronic fund transfers (EFTs), and mobile money. The ATM system is not connected to global electronic banking networks. Therefore, traveler's checks and credit cards are not commonly accepted. Mobile money service is not widely used outside urban areas, but the service is becoming more accessible to the rural population. However, there is potentially high demand for mobile money services given the country’s poor financial infrastructure and the costs and risks associated with keeping cash at home. There is a thriving non-bank financial sector, including licensed, regulated, and supervised institutions. The sector comprises foreign exchange bureaus, credit unions, village savings and loan associations (VSLAs), rural community finance institutions, microfinance institutions, a development finance company, mobile money services, and insurance companies. Most of these institutions, particularly those in the informal sector, make short-term, high-interest rate loans to their members. A list of the CBL’s regulations can be found on its website.
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