By Ange Aboa
ABIDJAN (Reuters) - Banks in Ivory Coast are struggling to secure repayment on up to 200 billion CFA francs ($348 million) in outstanding loans made to cocoa exporters during the country's crisis-hit 2016/17 season, bank officials said.
The banks have already restricted the flow of financing to some cocoa firms this season as a result, and the loans, if not repaid, could cause problems for the West African country's banking sector, they said.
"No matter the scenario, the losses will affect our bottom line and our activities because this is a lot of money that's going up in smoke," said one bank director.
He asked not to be named, as did other executives from four other banks interviewed by Reuters. They said it was difficult to estimate accurately the total amount of the loans, but their estimates ranged from 100 to 200 billion CFA francs.
Ivory Coast, the world's biggest cocoa producer, sells forward the bulk of its anticipated harvest so it can set a minimum price for farmers at the start of its October-September growing season.
But world market prices fell 40 percent over the course of the 2016/17 season and exporters were unable to honor their commitments to suppliers, forcing Ivory Coast's cocoa marketing board, the Coffee and Cocoa Council (CCC), to resell their contracts at a loss.
The sharp drop in world cocoa prices caused a number of domestic exporters, who had failed to hedge, to walk away from their export contracts rather than execute them at a loss. But many of those exporters had used revolving credit arrangements with the banks to purchase cocoa beans.
Bank executives said up to 12 banks were involved, including the local units of Societe Generale (PA:SOGN) (CI:SGBC), Ecobank (LG:ETI) (CI:ECOC), Attijariwafa's SIB (CI:SIBC) (CS:ATW), BNP Paribas's BICICI (PA:BNPP) (CI:BICC) as well as NSIA Bank (CI:NSBC) and BGFI.
These banks either did not respond to Reuters' requests to comment or said they did not want to speak about the subject. The CCC also did not immediately respond to a request for comment.
Another banker said that many of the purchases paid for with bank financing were cocoa beans that were not exported and remained in warehouses or were sold at a loss.
Accounting firm KPMG carried out an audit for the CCC following the 2016/17 season and this highlighted the financing problems.
"The defaults ... combined with the decline in quality of stocks risk weighing on the balance sheets of certain exporters who won't be able to pay back banks not only for credit from the harvest but also for other loans," KPMG's report, seen by Reuters, stated.
Exporters will need financing from the banks to make new cocoa purchases during the current season.
"We have a choice. Either invest another 150 to 200 billion (CFA francs) to make the stocks exportable ... or shut it all down and lose 100 billion," said another bank executive.
The immediate impact will be a further reduction in the financing available to smaller, domestic exporters, the bank officials said.
($1 = 575.5000 CFA francs)