Banking in Africa : Financing transformation amid uncertainty

European Investment Bank

• Publisher: European Investment Bank
• Year: 2020
• eBook ISBN: 9789286144950
• Topic: Business
• Subtopic: Finance
• Index: Business

In its fifth edition, this report focuses on recent developments in Africa's banking sectors and the policy options for all stakeholders. The study of banking sectors across all African sub-regions includes the results of the EIB survey of banking groups operating in Africa. Three thematic chapters address challenges and opportunities for financing investment in Africa: Investing sustainably in Africa's cities; Mobilising agricultural value chain financing in Africa: why and how; Remittances and financial sector development in Africa.

1

Results from a survey of African banking groups

Jean-Philippe Stijns[1]

Summary

This chapter takes stock of trends and strategic issues affecting banking groups in Africa, based on the results of the fourth edition of the European Investment Bank’s survey of banking groups in Africa (see Appendix 1). Our survey’s coverage has been extended to include the whole African continent, and the sample size has been increased in this edition from 25 to 46 banking groups operating in Africa. The 2020 sample of banking groups is composed of a mix of pan-African banks, sub-regional banks, foreign banks operating in Africa and national banks. A continental approach has the advantage over a regional approach of better encompassing banking group relationships that span multiple sub-regions. The overall message coming out of responses to this year’s survey is one of cautious optimism about a gradual return to growth and stability in African banking markets.

In line with the generally improving economic conditions in most African countries, most groups are in expansionary mode, mostly thanks to organic growth but also due to greenfield and brownfield investments. Nevertheless, some groups are still in consolidation mode, especially in the short term. The banking groups report improvements in terms of loan origination and funding conditions. Non-performing loans (NPLs) seem to be coming under control in most banking groups but they are still on the rise in some groups. Efforts to comply with Basel II and Basel III standards are also reported.

The groups are planning to expand their loan books, identifying manufacturing and agriculture as their top sectoral focuses at the moment. In addition, most banking groups report putting a very high priority on SME financing as a growth area. However, the banking groups identify some specific constraints to lending to SMEs: a shortage of bankable projects, a lack of effective collateral, a lack of managerial capacity, informality and a high default rate amongst SMEs. Most banking groups consider portfolio guarantee products as important but, unfortunately, guarantee needs are still predominantly unmet. Similarly, banking groups report a strong demand for local currency financing. Some groups also report that their most important technological needs concern credit risk management and lending technology.

In terms of products and service focus, African banking groups are still emphasising investment on e-banking and mobile banking services. Some groups are also deploying or planning the development of fintech, with the main focus on facilitating mobile money, electronic transfers and back-office operations. Banking groups view telecom companies primarily as partners rather than as competitors for the provision of mobile money services. It is commercial banks that banking groups consider as their most direct competition. A fair proportion of groups are also investing in lending-related fintech, including data analytics and blockchain technology.

Introduction

This chapter takes stock of strategic issues affecting banking groups in Africa and attempts to provide a snapshot of banking sectors. The analysis relies on the results of the fourth edition of the EIB’s survey of banking groups in Africa. For this purpose, an attempt is made to reflect in our sample the wide variety of banking groups operating in Africa’s banking markets. Three groups of foreign banks competing in the region can be distinguished: foreign affiliates of global banks from developed countries; foreign affiliates of banks from emerging countries, in which we can include the foreign affiliates of banks from South Africa; and foreign affiliates of regional African banks (multinational banks from Africa). The term pan-African banks is used when grouping banks operating across several African markets, based in an African country, including South Africa. Regional African banking groups are headquartered in a variety of countries and some enjoy a significant presence in a large number of countries.

The EIB survey questionnaire and its sample of banking groups are in their fourth edition in Africa thanks to the ongoing collaboration of many banking gro...

Table of contents

• Cover
• Title
• Contents
• Executive summary
• 1. Results from a survey of African banking groups
• 2. Banking in North Africa: recent trends and developments
• 3. Banking in West Africa: recent trends and developments
• 4. Banking in Central Africa: recent trends and developments
• 5. Banking in East Africa: recent trends and developments
• 6. Banking in Southern Africa: recent trends and developments
• 7. Investing sustainably in Africa’s cities
• 8. Mobilising agricultural value chain financing in Africa: why and how
• 9. Remittances and financial sector development in Africa
• 10. The European Investment Bank in Africa
• Copyright