Secrets of Sierra Leone’s Sound  Financial System in Banking (Part 1)

A recent survey reveals Sierra Leone has a resilient financial system in a robust banking sector, despite enormous challenges, domestic and external. Here are the secrets

Abubakar Hashim /Freetown

TheNEWS Magazine, reputed for its exclusive investigations, has unearthed the core reasons for a relatively resilient financial system in Sierra Leone despite mounting challenges, ongoing, both local and external.

In this edition, the banking sector, is the prime focus.

The main reason why the financial system particularly the banking sector remains resilient in Sierra Leone, is the visibly strong monetary and fiscal policies in place by the Central Bank and the Ministry of Finance. Investigations reveal that there is a cordial relations, both in policies and official interactions between the two entities unlike in many other African countries, where relations are visibly frosty. An unhealthy relations lead to policy summersault and catastrophies,

Another reason is the visibly strong management team in both institutions that constantly monitor financial indices and roll out interventionist strategies and measures to counter imminent and even unforeseen financial disasters. The COVID-19 and ongoing Russian War in Ukraine, as they affect economic activities are two classical cases. The strong management team at the Finance and Central Bank, with their two point men, Dr Dennis Vandi and Prof Kelfala Kallon, have proved worthy in ongoing current difficult economic challenges.

Another key reason, perhaps the most crucial, is the overall determined political will at the top, to direct sound economic polices. This has resulted in smooth synergy among line ministries and agencies, resulting in the availability of goods and services, especially in difficult times. President Julius Maada Bio has a history of strong leadership, anchored on sincerity and dedication. This medium had  interacted with him since 1993, when he was Minister of Information during the military era, onto first, as military Head of State, to currently as President of the country, in the form of exclusive interviews. He exhibits steady trend of thought and strong will of policy execution.

Though the economy is on an inflationary trend today, with prices of goods and  services on upward trend, as realized globally, there are no visible shortages of essential commodities in the country.

The Sierra Leone banking sector, through its Central Bank of Sierra Leone, re-denominated the country’s legal tender, Leones, on 1 July, 2022. The Governor, Prof. Kelfala Kallon, in an exclustive interview with this medium, revealed that “the re-denominated policy will facilitate ease of doing business, stabilize and strengthen the financial system but, he admits, the policy will not solve all the financial challenges.”

The banking sector, the catalyst to financial transactions, has proved its worth in Sierra Leone’s financial system. There are currently 13 Commercial banks in the country, 7 are of Nigerian origin. They are all performing well at optional levels, particularly Sierra Leone Commercial Bank SLCB and United Bank of Africa UBA SL.

There is effective banking supervision and monitoring from the Central Bank of Sierra Leone, locally called BSL. The bank Governor, Prof Kallon boasts to this medium that “…the commercial banks under my watch are now performing at optional levels, with cash disbursement now seamless, particularly   with introduction of the new re-denominated currency notes.”

The bank Governor further remarked the real reason behind re- redenomination, contrary to widely-held speculation that “re-denomination goes along productivity,” he clarified this position not to be true. “Re-denomination is justified in relation to income, not productivity …. A robust productive economy only bolsters currency valuation, not its circulation in any economy”, the governor clarifies.

The tight monetary policy by the Central Bank is another indicative factor to a resilient banking sector in Sierra Leone, anchored on a strong leadership at the apex central bank.

The main challenge, however, is sustainability of this momentum by the authorities, both at the Central Bank and the Finance Ministry, not to dissipate, in terms of policy summersault as in other countries.