Liquidity and Profitability Challenges for Sudanese Banks … A Roadmap to Overcome the Effects of War

Dr Al-Haytham Al-Kindi Yousif
The banking sector represents the backbone of the economy in any country. In Sudan, however, this sector is currently experiencing extremely difficult and complex conditions that have placed its key indicators—liquidity and profitability, the internationally recognised benchmarks used to evaluate banks—in a highly precarious position. While banks are attempting to restore balance as life gradually returns to some areas, they face structural challenges that threaten their ability to meet obligations to shareholders, employees, depositors, and the state alike.
The liquidity crisis in Sudanese banks did not arise solely from monetary policy decisions; it was also the result of the systematic looting of bank branches in areas under the control of the Rapid Support Forces militia. This reality created widespread fear among depositors, leading many to refrain from depositing their savings out of concern that the experience could be repeated or that banks might be unable to return funds upon demand.
The liquidity situation has been further aggravated by significant technological disparities among banks. One bank has effectively dominated electronic banking services due to the wide reach and functionality of its application, which has earned strong public trust. Meanwhile, other banks have struggled to compete technologically, depriving them of the cash inflows that accompany deposit growth.
With the erosion of the value of the national currency under inflation exceeding 400% compared with the pre-war situation, meeting payroll obligations and government fees has become another challenge for banks—particularly as the reopening of branches imposes additional operational costs on an already strained financial structure.
As for profitability, the financial statements of many banks show profits being reported during wartime—an issue that raises serious accounting questions. Given the disruption of previous financing operations due to the destruction of projects, the theft of their assets, and the general decline in economic activity, these profits often appear to be inflationary or “paper” profits resulting from asset revaluation.
Bank management sometimes presents these profits to maintain their administrative positions or reassure customers. However, this practice carries serious risks. It forces banks to distribute dividends to shareholders and pay taxes to the state from liquidity that is not actually available, thereby widening the financial gap and weakening banks’ capital bases.
A Roadmap: Lean, Well-Capitalised, and Technologically Intelligent Banking Entities
Emerging from this crisis requires urgent economic surgery based on the following pillars:
Encouraging bank mergers or capital increases
Banks should be encouraged to merge or increase their capital in order to create large, robust banking institutions capable of competing and absorbing shocks.
Digital and administrative transformation
Banking systems must be modernised to become more intelligent and technologically advanced, enabling banks to attract customers more effectively. This must be accompanied by lean administrative structures that reduce costs and improve responsiveness to market developments.
External engagement and attracting diaspora remittances
Sudanese banks must restore relationships with international and regional correspondent banks, particularly in countries such as Saudi Arabia, Turkey, and Qatar. At the same time, genuine incentives should be introduced to encourage expatriates to transfer their funds through official banking channels rather than informal networks.
Shifting towards small and microfinance
Large-scale financing has become highly risky in the current environment of instability. The solution lies in focusing on small businesses, youth entrepreneurship, and rural agricultural financing in safer areas. This type of financing offers rapid turnover, spreads risk across a wide client base, and generates genuine profitability.
Restructuring deposits through innovative investment instruments
In the current inflationary environment, depositors are unlikely to use traditional savings products. Banks therefore, need to design innovative deposit schemes, such as participatory investment instruments linked to gold mining or export-oriented agricultural products, that protect the purchasing power of depositors’ funds and encourage holders of idle liquidity to return to the banking system. This would increase liquidity while creating profit opportunities for all parties.
Expanding digital branches and banking agents
Banks should increasingly rely on digital branches or authorised banking agents, such as licensed retail outlets providing basic withdrawal and deposit services. This approach significantly reduces operational costs while making financial services accessible to a broader population.
Reintroducing sovereign sukuk and government financing instruments
Through cooperation among the Ministry of Finance, the Central Bank, and the banking sector, sovereign sukuk linked to reconstruction projects—such as bridges, roads, and power stations—should be developed. These instruments represent an effective tool for managing liquidity and directing it towards projects that offer guaranteed returns backed by government guarantees.
Ultimately, the recovery of the banking sector means the recovery of the national economy as a whole. The next phase requires transparency from bank managements, innovative thinking beyond conventional frameworks, and political will from the central bank to drive structural reform.
Only then can Sudan’s banks become the primary engine for mobilising the country’s vast resources and the central actor in rebuilding what the war has destroyed.

Shortlink: https://sudanhorizon.com/?p=12158