Taxation among the factors limiting business development

Taxation is one of the main factors limiting the development of banking activities. This observation was made by three quarters of the banks surveyed by National Bank of Madagascar (BFM) as part of its Economic Survey (ECE) for the third quarter of 2023.

The Banking Sector Economic Survey is carried out four times a year among the 13 territorial banks in Madagascar. The results are used to review bank business conditions, with a view to adjusting monetary policy.

According to the survey, 75 % of banks in Madagascar have identified uncertainties stemming from the socio-political and economic context as their primary challenges. Additionally, taxation, which was previously ranked tenth, has now risen to the third spot among major concerns, as indicated by 50% of respondents.

Despite these obstacles, Madagascar’s banking sector has witnessed an uptick in loan demand and credit line drawdowns compared to the previous quarter, according to the report by the BFM (Banking and Finance Monitoring). Banks reported a notable increase in these metrics, with rejection rates for credit applications remaining relatively low, below 25 %.

Furthermore, despite facing higher operating costs, the majority of banks have reported an increase in profits. To counteract these rising costs, banks have implemented an upward revision of average interest rates. In terms of loan distribution, the trade sector emerged as the primary beneficiary, accounting for 24.5 % of loans granted, followed by the construction (15.1 %), agriculture (13.2 %), and oil distribution (9.4 %) sectors.