Central Bank governor vaunts currency stability 

What are the main competitive advantages of Djibouti’s banking and financial framework?

Djibouti offers a liberal framework, with no exchange controls, and a strong and stable currency governed by the currency board system. Pegged to the dollar since 1949, our currency, the Djibouti franc, ensures a stability that is unique in Africa and total convertibility. 

This monetary system facilitates external transactions and reassures investors, as well as entrepreneurs and individuals, about the movement of capital and currencies. 

To this framework should be added Djibouti’s exceptional political stability and its membership of regional and continental organisations such as IGAD (Intergovernmental Authority on Development); COMESA (Common Market for Eastern and Southern Africa and AfCFTA (African Continental Free Trade Area).

How many banks are currently operating in Djibouti and what are their nationalities?

Djibouti has 12 banks with national and international capital, notably of French, Ethiopian, Moroccan, Chinese, Bahraini and Yemeni origin. An Egyptian and an Australian bank will soon be setting up.

How has Djibouti’s banking sector evolved over the last two decades?

The real change began in 2004-2005. Before that, the legal framework inherited at independence limited banking expansion. So we revised the regulations, cleaned up the sector and liquidated the non-compliant banks. 

Thanks to these reforms and to Djibouti’s economic performance, the sector has grown from the two banks remaining in 2006 to 12 today, with new projects to create financial institutions in the pipeline.

The level of banking penetration remains relatively low in the country. What initiatives are underway to increase it and improve access to financial services?

The rate of access to banking services has risen from 7% in 2005 to 32% today. We have introduced incentives – such as the obligation, set out in a presidential decree, for companies to pay any salary over 40,000 francs via a bank account. 

However, obstacles remain, particularly due to the significant weight of the informal economy. To remedy this, we have introduced microfinance structured around cooperative models, with much more flexible conditions for opening accounts, to enable the informal sector to gradually access financial and banking services.

Islamic banks are playing an increasing role in the economy. What is special about them and how are they evolving? 

Islamic banks meet a specific need, because a large part of the population is Muslim and prefers to avoid banking products involving interest rates for reasons of compliance with sharia law. 

In 2006, we introduced the Islamic Finance Act to enable them to enter the market. Today, there are three and they represent about 20% of the banking market. Their expansion is promising and, in the long term, they could play a key role in the financing of public infrastructures, particularly through participative financing mechanisms and others that are broader than universal banks’ offerings.

How can Djibouti serve as a springboard for banks wishing to establish themselves in the sub-region?

Djibouti is banking on the opening up of markets and regional and continental integration to overcome the constraint of market size. The banks in this country are closely following developments in the regional banking sector, particularly in Ethiopia, which is undergoing rapid change and liberalisation. 

This dynamic represents a major opportunity for national financial institutions which, if the process continues, could capture a share of this market of more than 120m people. 

Djibouti also offers a competitive and attractive banking environment that complies with the convergence criteria of the COMESA roadmap, which could lead to the creation of a single regional currency, thus consolidating our role as a financial hub. 

More broadly, Djibouti serves as a springboard for banks wishing to establish themselves in Africa in general and East Africa in particular.

What are the main challenges ahead?

The main challenges remain achieving the objectives in terms of financial inclusion, modernisation of payment methods, digitalisation, supervision and compliance with international standards – whether in relation to the Basel rules for the management and supervision of universal banks; the IFSB (Islamic Finance Services Board) for Islamic banks; or the FATF (Financial Action Task Force) standards for the economic, legal and financial environment of Djibouti. And for each of these objectives, we have a precise roadmap.

Financial inclusion and compliance will take off considerably in the very near future with the digitalisation of payment methods and transactions. 

It should be remembered that we had already taken a big step forward in 2022 with the introduction of the real-time gross settlement (RTGS) system and the ACH (Automated Clearing House), which connects all banks with the Central Bank via a closed and secure circuit. 

Djibouti recently submitted its FATF assessment. What is the initial feedback?

In 2018 Djibouti joined Gafimoan – the Groupe d’Action Financière du Moyen-Orient et de l’Afrique du nord (Middle East and North Africa Financial Action Task Force). In preparation for the evaluation of its system by its peers, it first conducted its own national evaluation in 2022 to adjust its response to the threats it faces. 

In accordance with Gafimoan procedures, Djibouti has begun the process of mutual evaluation of its AML/CFT system (anti-money laundering and combating the financing of terrorism), conducted under the aegis of Gafimoan evaluators. This was completed with the adoption of the mutual evaluation report from 17 to 21 November 2024 in Riyadh. 

Gafimoan analysed the legal and regulatory provisions in force in Djibouti to determine what constitutes the law for suppressing financial crimes in accordance with the 40 FATF recommendations and their effective implementation; to find out whether or not Djibouti identifies, prosecutes and punishes violations of the law committed on its territory by those subject to it; and also whether Djibouti participates in international cooperation to suppress financial crimes at the international level, and to what extent.

Gafimoan concluded that Djibouti has a solid AML-CFT framework that is broadly in line with the standards established by the international community, but that it is largely the result of recent reforms.

After the FATF assessment, what are the main areas identified for improvement? 

The first practical achievement following this evaluation was the establishment of an operational organisation, with six technical sub-committees responsible for the various risk areas; and the approval of a national strategy to combat money laundering and the financing of terrorism, which included some sixty objectives. 

The FATF evaluation highlighted a number of recent improvements, such as the establishment of the National Financial Intelligence Agency, now an independent authority responsible for AML/CFT; the development of a national risk assessment; and the complete overhaul of the legal and regulatory corpus in line with international best practices. Collaboration between the state agencies has been strengthened. 

There is better risk management within the financial sector and, above all, significant progress among players in the non-financial sector, such as lawyers, notaries and other regulated professions.

We have adopted a new AML-CFT strategy where the responsibilities and actions incumbent on all stakeholders have been updated and focused on the expected results to raise Djibouti’s rating from enhanced monitoring to normal monitoring during the current year. 

What does the appointment of Djibouti’s minister of foreign affairs as head of the AU Commission mean?

This recognition, beyond its prestige, consolidates Djibouti’s position as a leading regional logistics platform and a major regional economic centre in the making.