It covers payment methods and information on, banking systems, foreign exchange controls, and U.S. and correspondent banking.
Methods of Payment
Payment can be arranged through internationally accepted payment methods such as confirmed irrevocable letters of credit (LC), bills of collection, and open accounts. Some banks offer methods such as electronic transfers, remittances, foreign exchange, and mobile transfers/payments. They also offer debit cards, loans, investment solutions, e-products, term deposit, and microfinance. For example, Ecobank, Guaranty Trust Bank, International Bank (IB), and the United Bank for Africa (UBA) offer international Visa debit card services for customers. Ecobank and UBA facilitate payment for goods and services using a point of sales terminal (POS) at supermarkets, some hotels, and some large merchandise stores. Their ATM services are connected to global electronic banking networks. There are numerous intermediate financial services providers across the country, such as licensed foreign exchange bureaus, microfinance institutions, credit unions, rural community finance institutions, village savings and loan associations (VSLAs), a development finance company, mobile money services, and insurance companies.
In 2021, the CBL continued its policy of encouraging the use of mobile money by dropping charges on person-to-person (P2P) transactions. The CBL reported that the use of mobile money services has become widespread in recent years, particularly as banks compelled customers to register or subscribe to mobile money accounts to make large volume transactions of Liberian dollars. The number of mobile money agents is also rising because the CBL allowed commercial banks to integrate with mobile network operators outside of the national electronic payment switch. The government is increasing the use of mobile money to pay salaries to civil servants in rural areas and to collect taxes. Many businesses and individuals have begun using the mobile payment system and available digital financial services to pay taxes and conduct routine financial transactions. There is potentially high demand for the services given the country’s poor financial infrastructure and the risks associated with keeping cash at home, but the lack of a national switch limits mobile money’s growth potential for now.
Traveler’s checks and credit cards are not generally accepted except by a few large hotels and supermarkets. Many commercial banks operate MoneyGram and Western Union outlets for payments and for domestic and international electronic fund transfers.
In January 2021, the CBL abolished a requirement that 25 percent of money transfers from abroad for personal remittances must be in Liberian dollars and 75 percent in U.S. dollars. Fees for currency exchange as well as wire transfers can be high. The CBL requires transferring banks to file normal cash transaction reports and, depending on the amount of transfer, the waiting period ranges from a few hours to three business days. CBL regulations limit individuals without bank accounts to two over-the-counter transfers of up to US $5,000 within a 30-day period. There is no credit rating system or agency, but banks often rely on the CBL’s manual Credit Reference System (CRS), which provides information to banks and non-bank financial institutions about borrowers’ credit history, including any derogatory information. Banks report that the system is useful for risk management in the financial sector, and it is helpful producing credit records on both current and potential borrowers. The CBL has a centralized Collateral Registry System used by commercial banks, microfinance institutions, and non-bank financial institutions to register security interests in movable property only. Its primary objective is to create access to finance for businesses, especially micro, small, and medium businesses. Several businesses, especially those in the informal sector, continue to use different kinds of movable assets as collateral to secure loans through the CRS.
For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide.
The CBL is responsible for licensing, regulating, and overseeing the financial sector in Liberia. Banking services within Liberia are provided by ten commercial banks with branch outlets including payment windows/annexes, a development finance company, and a deposit-taking microfinance institution. There are ten commercial banks all of which are foreign owned except for Liberia Bank for Development and Investment (LBDI). In 2021, the CBL reported that the banking system remained relatively stable with banks and other financial institutions showing signs of resilience in the wake of the COVID-19 global pandemic. The CBL singled out a rising non-performing loan rate of 22 percent—well above its 10 percent threshold—as a downside risk. The CBL has said it is taking action to address non-performing loans but has not been specific.
The banking sector accounts for at least 85 percent of the total assets within the financial system, according to the CBL. The sector recorded mixed results in key balance sheet indicators compared to the preceding year. As of December 2021, total assets declined by 1.35 percent and total loans and advances dropped by 7.95 percent. Total capital, however, increased by 5 percent and total deposits rose slightly by 0.01 percent.
The banking industry’s liquidity ratio was of 39 percent and the capital adequacy ratio 31.8 percent as of December 2021. Both figures are well above the regulatory minimums of 15% and 10%, respectively. However, the CBL reported that “a significant portion of the liquid assets of the system was in Treasury instruments,” which partially explained liquidity constraints that continue to challenge commercial banks.
In 2021, wider use of digital payments eased seasonal shortages of Liberian dollars. The CBL infused billions of new Liberian $100 banknotes into the economy to replace mutilated notes and address the liquidity stress in commercial banks. In the past, the CBL attributed the chronic Liberian dollar liquidity squeeze to external factors such as an increased volume of currency outside the banking system, weak loan recovery that affected overall cash flows, and the seasonal demand for cash during the so-called festive periods of the Christmas/New Year holidays and Independence Day (July 26). Generally, the CBL focuses monetary policies on price stability to manage the Liberian dollar liquidity while it utilizes other monetary policy instruments to maintain overall financial sector stability.
Although not mentioned in CBL reports, commercial banks and businesses reported considerable difficulty in accessing Liberian dollars and, sometimes, U.S. dollars in recent years. These access difficulties include money saved by private individuals at commercial banks and by commercial banks at the CBL.
Most banking institutions can provide some short-term trade financing and operating capital to businesses that have good credit records. Historically, commercial banks have had no domestic instruments into which to place liquidity. However, the CBL recently began to offer treasury bills in Liberian dollars. Foreign banks or branches can establish operations in Liberia and are subject to prudential measures or other regulations required by the CBL.
Some limitations of the banking system might impact operations for U.S. businesses, particularly outside of Monrovia. They include the obstacles to domestic travel—such as poor roads, lack of affordable electricity, and unreliable communication links—increasing the risk of accepting collateral based outside Monrovia. Also, the unreliable land title system hampers access to credit in general, especially for local entrepreneurs. There is a non-bank financial sector, including licensed, regulated, and supervised institutions. Most of these institutions, particularly those in the informal sector, make short-term, high-interest rate loans to their members. Some of those operating in the informal sector offer anonymity to those seeking loans or exchanging currency, which raises concerns about the possibility of money laundering or terrorist financing.
Foreign Exchange Controls
Liberia has a managed floating exchange rate system, with Liberian and U.S. dollars being legal tender. There are no restrictions or limitations placed on foreign investors in converting, transferring, or repatriating funds associated with an investment (e.g., remittances of investment capital, earnings, loans, lease payments, and royalties). Liberian law allows for the transfer of dividends and net profits after tax to investors’ home countries. The Investment Act permits the unrestricted transfer of capital, profits, and dividends “through any authorized dealer bank in a freely convertible currency.” Therefore, funds associated with any form of investment can be freely converted into any world currency. The CBL’s regulation concerning transfers of foreign currency stipulates that every business, entity, or individual making a foreign transfer of funds may do so without limitation of the amount to be transferred. However, the amount to be transferred must have been in an entity’s bank account for no less than three banking days prior to the transfer. The CBL displays, and requires commercial banks to display, the official market exchange rates but the prevailing market rates largely fluctuate based on market demand and supply forces. The U.S. dollar can be freely exchanged for Liberian dollars at commercial banks, licensed foreign exchange bureaus, petrol stations, and large supermarkets. This has resulted in a dual currency arrangement that sometimes exerts additional pressure on the Liberian dollar due to preferences for the U.S. dollar for most transactions involving imported goods.
It is advisable for foreign investors to conduct foreign exchange operations with commercial banks or established licensed forex bureaus. Large-scale business and government transactions are mostly conducted in U.S. dollars, while retail or day-to-day routine transactions are conducted in either currency. Contracts and tax agreements are typically specified in U.S. dollars, and about 70 percent of taxes are paid in U.S. dollars. There are many large foreign exchange bureaus as well as small scale foreign exchange operators all over the country, some of which are not registered with CBL. However, it may take several days to exchange large sums of money due to a shortage of foreign exchange. Remittance inflows are a major source of foreign exchange in the Liberian economy. Transfers of more than US$10,000 must be reported to the CBL, and no more than US$7,500 in foreign currency banknotes can be moved out of the country at any one time.
U.S. Banks and Local Correspondent Banks
One of Liberia’s ten commercial banks, International Bank of Liberia, Limited (IB), is partially U.S-owned. IB bank partners with Pan African Capital Group (a Washington-based investment banking financial entity), Databank Group, and Trust Bank of the Gambia, and its correspondent banks are Ghana International Bank Plc, Bank of Beirut, MEAB Bank of Lebanon, and BMCE Bank International. There is a limited number of correspondent banking relationships in Liberia. The U.S. Embassy in Monrovia is not aware of any specific country programs currently offered in Liberia by the Export Import Bank of the United States. The Nigerian-owned United Bank for Africa (UBA) has branches in about 20 African countries, with subsidiaries in New York and London, while Ecobank operates in several African countries, including Togo where its headquarters, named Ecobank Transnational, is located.
Further details on financing in Liberia can be found in the 2022 Liberia Investment Climate Statement.