Methods of Payment
For international transactions, Madagascar uses several payment methods including open account, letter of credit, cash in advance, and documentary collections where the bank exchanges/delivers shipment documents under orders from shipper’s bank.
Credit cards (Visa, MasterCard, American Express, Eurocard and Diners) are accepted by larger hotels and restaurants. The most widely accepted card is Visa. Most shops will not accept payment other than cash, and card use is restricted to major banks, department stores, and hotels.
For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide available at https://www.trade.gov/trade-finance-guide-quick-reference-us-exporters
Madagascar’s financial sector has 11 commercial banks (BMOI, BNI, MCB, SBM, SGM, BOA, ABM, BGFI, BBM, BMM, SIPEM); most of them are subsidiaries of foreign banks based in Mauritius, France, and mainland Africa. The top four banks account for more than 86 percent of assets and deposits. A foreigner can open a bank account provided s/he has established resident or investor status.
Despite a relatively sound financial system, financial intermediation remains low, and Madagascar ranks 132nd out of 190 countries in terms of “Getting Credit” in the 2020 World Bank Doing Business Survey. Madagascar’s banks lend only about 15.6 percent of GDP to the private sector, compared to an average of 25 percent for Sub-Saharan African countries (end 2020 figures). Banks favor short-term loans (52 percent of overall loans) due to perceived risk, lack of sophisticated financial products, and the lack of a secondary market for offsetting risk. Moreover, credit benefits only a limited number of sectors such as commerce. Finally, of the credit extended to the private sector, 69 percent went to private companies and 29 percent to individuals and households.
Foreign Exchange Controls
Overseas earnings must be declared and then repatriated to Madagascar. In 2020, the GOM cracked down on delays in repatriation of foreign exchange earned overseas in the wake of COVID-19 trade disruptions. While Madagascar abides by the IMF’s Article VIII statutory framework (which prohibits direct government limitation on foreign exchange use and availability), new regulations such as limits on who is allowed to have foreign currency-denominated accounts and higher reserve requirements of 24 percent on deposits held in foreign currency versus 11 percent on Ariary-denominated deposits signal a more restrictive environment.
An interbank foreign currency market (MID) determines the exchange rate daily. foreign currency-denominated accounts There are money-changing facilities (forex bureau & bank kiosks) available at the major banks in Antananarivo and at the airport. Foreign currency can be exchanged in most main towns and cities. There are ATM machines available in the major towns. All ATMs will only dispense the local currency, the Ariary.
U.S. Banks and Local Correspondent Banks
U.S. banks do not operate in Madagascar. Most of the commercial banks have US correspondent bank relationships for facilitating international transactions, which are often denominated in USD.
Madagascar allows the free conversion or transfer of funds associated with foreign investment, including remittances of investment capital, earnings, loan repayments, and lease payments, so long as a mandatory declaration is filed at the relevant branch of the Ministry of Economy and Finance.