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As Angola attempts to revive its conflict-shattered economy, it needs a healthy banking system to help a recovery that will be led by its booming oil sector.
But if foreign banks want to establish themselves in the country domestic banks might find themselves starved of business in the harsh economic climate of a country emerging from decades of civil war.
"What's missing is banks and other financial institutions to finance small-end companies," said Laurence Clarke, World Bank resident representative in Angola.
"Particularly post-conflict, you need them to focus on the needs and challenges and requirements of small investors like the guy in the provinces who wants to go into farming," he said.
Ten years ago, few banks had a physical presence, but since the liberalisation of the economy and the floating of the exchange rate in the late 1990s, branches have appeared all over the capital Luanda and in some of the provinces.
That process accelerated further with the end of a 27-year civil war in 2002 which gave Angolan banks a new lease on life.
There are now 10 commercial banks with licences in Luanda - eight Angolan and two Portuguese. Another two are subsidiaries of Portuguese banks but are technically Angolan.
"If you've been sitting in this banking system for the last few years, you can't believe the changes that have happened," said one banker in Luanda.
"The sector was ready for the end of the war and now people have a lot more faith in the banking system and the banks themselves have changed a lot too."
Serious problems remain in the former Marxist state where bureaucracy can be stifling.
"The Angolan banking system is extremely rudimentary. You need to qualify that against the backdrop of...war. But we're in the 21st century and we need to move fast," said a senior financial industry source. On the retail side, banking services are basic at best.
"I have never been in a system where you need to ask a bank for a statement, where nobody accepts a cheque, where it takes forever to transfer funds," one disgruntled customer said.
A peek inside one bank in Luanda reveals tellers sitting idle as the long lunchtime queues grow.
Industry sources say that once an automated clearing system is up and running, many of the problems customers now face will go away.
In commercial banking, customers say that a lack of long-term credit is hampering business growth. Observers argue that now that the war is over banks should be playing a bigger role in rebuilding the country.
For the major oil companies - Angola is the second largest oil producer in sub-Saharan Africa after Nigeria - and other foreigners, banking is not a problem.
Most have the luxury of external financing and solid, reputable banks in their home countries. But many Angolan investors look for credit from local banks, which sources say is not always forthcoming.
"Returning refugees and displaced people need small, community based micro-credit to help them set up their lives," Clarke said.
Independent economist Jose Cerqueira said banks did not make it easy for investors to secure long-term credit.
"Angolan banks work well but don't do some functions that would be useful for the economy," he said.
Foreign banks are queuing to enter the market, including two leading South African banks - Stanbic and Absa.
Others are also said to be eyeing Angola for its potential. Competition should prod Angolan banks into action.

Copyright Reuters, 2004

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