Burkina Faso has experienced a strong economic performance over the past decade. But despite significant progress, the country's economy remains relatively undiversified and vulnerable to climatic and external shocks. Real GDP growth averaged 5.7 percent between 2002 and 2008. However, lower cotton production and falling global commodity demand and prices following the global economic and financial crisis, combined with an energy crisis and heavy rains and flooding in 2009, contributed to a slowdown in economic activity. As a result, real GDP growth declined from 5.2 percent in 2008 to 3 percent in 2009 but picked up again in 2010 reaching 7.9 percent. Despite a slow down in 2011 the Burkinabe economy is expected to growth at 7 percent in the next two years.

The Burkinabe financial system appears to be dominated by multinational, pan-African banks, accounting for around 90 percent of total financial system assets. The banking sector, comprised of 12 commercial banks, is highly concentrated, with the three largest banks holding nearly 50 percent of total financial sector assets. Banks are generally adequately capitalized, but remain vulnerable due to their overexposure to the cotton sector. The government's position in the banking system, a source of vulnerability in the past, appears to have stabilized, and compliance with regional prudential norms has marginally improved. As of end-June 2011, the majority of banks met the new regional minimum capital requirement of CFAF 5 billion. However, while the ratio of regulatory capital to risk-weighted assets has remained constant at 12.4 percent, the ratio of gross non-performing loans to total loans has increased from 15.8 percent in December 2008 to 19.7 percent in June 2011. Access to banking services remains low, at about 7 percent for the country as a whole and interest rates, in spite of good bank capitalization, are high at 10 to 12 percent.

Access to finance remains a major issue. World Bank estimates suggest that around 26 percent of the Burkinabe population has access to financial services. Access to microfinance is however expanding. According to a report by the Central Bank of the West African States (BCEAO) about 41 microfinance institutions (MFIs) operate in the country, serving around 800,000 customers. Authorities have, in recent years, embarked on a series of reform programs to improve the business environment and facilitate financial transactions. Recent measures include the creation of specialized commercial chambers in the court system, as well as reforms to ease property registration and transaction procedures. Authorities have also adopted a new law on decentralized financial systems, enacted in 2009, which, in cooperation with the BCEAO, introduced a single authorization system, strengthened application examination procedures, and reinforced prudential rules and mandatory certification of accounts.

As a member of the West African Economic and Monetary Union (WAEMU) Burkina Faso shares a common currency, Central Bank (the Central Bank of West Africa, or BCEAO), and joint monetary policy with other member states. The BCEAO is not only responsible for the monetary and reserve policy of member countries, but also for the regulation and oversight of financial and banking sector activity. A legal framework regarding licensing, bank activities, organizational and capital requirements, and inspections and sanctions (all applicable to all countries of the Union) is in place and underwent significant reforms in 1999. Microfinance institutions are governed by a separate law, which regulates microfinance activities in all WAEMU countries. The insurance sector is regulated through the Inter-African Conference on Insurance Markets (CIMA). While still relatively undeveloped, regional capital markets have been expanding in recent years. The payment and settlements system and clearing mechanisms were reformed in 2004 through the BCEAO, which established a Real Time Gross Settlement (RTGS) system and SWIFT facilities for banks, financial institutions, the stock Exchange and the Central Bank. Burkina Faso is also a member of the regional Bourse Regional des Valeurs Mobilières (BRVM) located in Abidjan, Ivory Coast. As of 2009, the regional Stock Exchange's market capitalization reached nearly 10 percent of Burkina Faso's GDP. Burkina Faso's fixed income market is integrated with that of other WAEMU countries. The Central Bank, governments and regional banks all issue bonds and treasury bills. Member states have started to increasingly issue treasury bills to finance public spending in an effort to move away from Central Bank loans, though the BCEAO remains the most important issuing entity in the region.

As of March 2013, Burkina Faso received a sovereign rating of B by Standard and Poor's. Regional and national fixed incomes markets are still in their early development stages. Issuance by corporate entities remains limited. Investors can directly access primary markets, and various brokers and dealers provide indirect access, while foreign investors participate through local banks. Commercial banks still largely dominate the investor base as the main purchasers of treasury bills and bonds. Access to secondary markets within the WAEMU remains limited; transactions can only be conducted by certified intermediaries, while most investors adopt a buy-and-hold approach.

Sources

Banque Centrale des Etats de l'Afrique de l'Ouest (BCEAO)

Ministère de l'Economie et des Finances

Bourse Regional des Valeurs Mobilières (BRVM)

FSDI Sources – click here

IMF Article IV

WB/IMF FSAP

WB Country Profile

IMF World Economic Outlook

African Economic Outlook

African Fixed Income and Derivatives Guidebook

IMF Regional Economic Outlook, Sub-Saharan Africa