Gabon, located in West Africa, has a population of two million. Gabon is bordered by Equatorial Guinea, Cameroon, the Republic of the Congo and the Atlantic Ocean. As the fifth-largest exporter of oil in Africa, much of Gabon’s government revenue and economic growth are dependent on oil. Oil makes up 80 percent of the country’s exports and 45 percent of the country’s GDP. One factor in the future of Gabon’s economy is credit access. Improvement in credit access in Gabon can stimulate the country’s economy.
Economy and Credit Access
Credit access is the ability of individuals to borrow money and pay back debts later. Borrowing is valuable because it encourages capital accumulation. Investment promotes entrepreneurialism and makes savings more secure. As such, credit access is an essential part of financial inclusion, or an individual’s ability to access financial services. Although there has been some recent progress, more is needed to ensure that credit services are available to all Gabonese.
Similar to most developing countries, many Gabonese are reliant on remittances for their borrowing needs. Remittances are money sent back to a country from a friend or family member abroad. In 2015, remittances constituted 13 percent of Gabon’s GDP. Even with this help, however, many Gabonese are forced to spend their incomes on their immediate needs. As a result, they do not have the ability to save.
Only 16 percent of Gabonese men over the age of 60 have money saved for old age. What is more, many Gabonese lost credit access in 2015 when the government decreased its spending on financial inclusion. This was mainly due to a fall in oil prices, which decreased government revenues from oil exports. The price of oil halved from 2014 to 2015. The government responded by cutting back on state loans to businesses and slowing measures to increase credit access. Consequently, overall bank lending went down by five percent in 2015.
Improvements in Credit Access
Since then, however, credit access in Gabon has achieved major progress. A greater proportion of Gabonese has bank accounts than the average sub-Saharan Africa country. A couple of key changes allowed for this advancement.
First, the proliferation of mobile phones expanded the geographic reach of bank access. In 2017, 82 percent of Gabonese had mobile phones. Roger Owono Mba, a manager at the Gabonese Development Bank, explained that “Mobile money services do not require individuals to have a formal relationship with banks. Users can add credit, pay for products or transfer funds through mobile accounts.” Many other countries in Africa are experiencing a similar upsurge in mobile phone usage and a subsequent decline in their un-banked populations.
Next, the government began requiring civil servants to open bank accounts in 2014. As a result, all public sector employees in Gabon have access to greater financial services. A similar initiative in 2015 made bank accounts mandatory for all Gabonese receiving student grants. Such initiatives give people the option of going to banks for their financial and borrowing needs. Additionally, they show that the government is interested in making bank access available to more of the population.
Continued Improvements to Credit Access
Overall, these improvements provide hope that all Gabonese will have access to credit to increase their investment, consumption and entrepreneurialism. The World Bank finds that 55 percent of Gabonese have an active bank account, compared with just 28 percent in 2014. Continuing this trend of improved credit access in Gabon will be critical for its long-term economic stability.
– Abraham Rohrig