It is to be hoped that this move is the first step in making the Libyan banking system more open and transparent. The largely state-owned banking sector is supposed to become fully privatised by 2009, according to the Central Bank Governor, Farhat Bengdara, in an interview with the Financial Times. This is an aggressive timescale for such an undertaking, bearing in mind that 94% of the banking market is controlled by state-owned banks which both limits competition from privately-owned banks but also reduces the incentive for competition between state banks. A further development in the reform of the sector is the merger of Oumma Bank and Gumhouria Bank reported elsewhere in this issue (see page 15).
Banking penetration is low in Libya compared to neighbours Tunisia and Egypt so the incentive for foreign banks to invest is high although whether the central bank or Colonel Gaddafi would want the whole sector to fall to outsiders is another matter. In the meantime BNP Paribas will bring to Sahara Bank the banking know-how and technology platforms necessary to promote the high rate of growth necessary to provide a rapid return on their investment.
