CONAKRY — Located by the Atlantic Ocean on the west coast of Africa, Guinea is a country with a population of almost 12 million people. The country gained its independence from France in 1958. Until 1984, Guinea was under military rule; however, in 2010, it held its first official democratic elections. Though Guinea’s economy has been growing since 2016, 47 percent of its population remains below the poverty line. The country also ranks 175 out of 189 countries and territories on the United Nations Human Development Index. However, encouraging credit access in Guinea could be an important step in reducing poverty.
Guinea’s Economic Potential
Guinea’s economy has been slowly but steadily increasing. In 2015, GDP growth was only 3.8 percent, but that number jumped to 10.6 percent in 2016 and 10.6 percent in 2017. Part of that can be attributed to the fact that Guinea possesses the world’s largest reserves of bauxite (more than 40 million tons) and untapped iron-ore reserves (more than 2.4 billion tons).
Additionally, Guinea’s hydro potential is enormous since it is located at the source of several West African rivers and receives ample rainfall. According to the International Hydropower Association, Guinea only takes advantage of 5 percent of its hydropower potential. Of the 6,100 MW of potential energy, the country only uses 125.4 MW despite the fact that over 9 million Guinea citizens live without electricity. By tapping realizing the full potential of the country’s natural resources, Guinea could begin making significant changes to improve its poverty rates.
Credit Access in Guinea
Credit access in Guinea remains a significant issue as the country has a low credit rating of 15, indicating it is a great financial risk. According to Global Findex Data, only 5.8 percent of the country’s citizens over the age of 15 used digital access to make or receive payments in 2018. Meanwhile, 24.1 percent of the Guineans borrowed money from friends and family.
In December 2017, Guinea was approved for a new Extended Credit Facility after the end of Guinea’s first ever International Monetary Fund program. In order to ensure that all new loans are being used to the best of their ability to produce a project that will help the nation, the World Bank and IMF teams are currently working closely with authorities in Guinea.
The use of mobile banking is spreading through Africa since more than 70 percent of the population in Guinea use mobile phones. Mobile banking makes it much easier for citizens to use financial institutions as opposed to relying on cash transactions. Currently, mobile carriers, such as Safaricom and Vodacom, offer mobile banking services that allow people to store credit on their phone, pay bills and buy products. The service has been so successful that, in the countries of Tanzania, Kenya and Uganda, mobile bank accounts now outnumber traditional bank accounts.
Authorities have also implemented reforms to protect the citizens of Guinea, such as “new management norms and ratios, and the modernization of payment systems.” Furthermore, they have “increased monitoring and regulation of banks and microfinance bodies” to bring the country’s financial system up to international standards.
With a new framework in place, government supervision and transparency concerning credit access should increase as the World Bank continues its services that support the government and its people. With government transparency and developmental projects, hopefully, credit access in Guinea will improve and raise its citizens out of poverty through new opportunities.