Leveraging of Mobile Networks

KPMG Africa’s Banking in Africa Report (2015)

The banking sectors of a number of sub-Saharan Africa (SSA) countries have exhibited significant growth in recent years. The key contributing factors have been increased economic activity and improved regulatory oversight. However, the rapid rise of pan-African banks has also been a contributing factor. The growing presence of major pan-African and global banks on the continent has undoubtedly improved the availability and quality of financial services in recent years. That said, large banks from well-developed financial markets on the African continent have made the biggest impact. As a result, financial sectors across the SSA region stand to benefit from gains in efficiency, innovation and financial deepening. On the other hand, the rise of pan-African banks raises the possibility of financial sector contagion across borders. As such, banking sector oversight may need to be improved and the regulatory frameworks strengthened as financial markets become more integrated.

Despite strong banking sector growth, a large proportion of the African populace still does not make use of formal financial services. Banking penetration still remains as low as 36% in some of the larger economies. The fact that commercial banks’ reach – in terms of branches and ATMs as a proportion of the population – remains well below global averages certainly does not prove helpful in this regard. That said, commercial bank branches and ATMs are costly and most efficient in areas with high population density and are thus not really suited to serve the large unbanked populations which are widely dispersed over large areas. To bridge this gap, banks have started to explore alternative operating models, including mobile banking, mobile branches and using third-party agents. This Banking in Africa Report 2015  intends to explore the above-mentioned topics in more detail.

Current State of Banking

Financial sectors across SSA are still largely underdeveloped – the financial sectors of South Africa and Mauritius represent the most notable exceptions in this regard – while banking industries continue to dominate the landscape in terms of total assets and services.
Nonetheless, financial sector development has been on the agenda of African policymakers for some time. Various
policy reforms over the past decade have contributed to an environment more conducive to financial sector
development. Governments have made progress in introducing much needed legal/ regulatory frameworks,
information systems and regulatory institutions.

As a result, the depth and coverage of financial systems, when measured by the ratios of broad money
and private sector credit to GDP, have improved over the past three decades. That said, the levels of financial
sector depth and coverage remain well below global averages. Even more concerning is the fact that the gap
between SSA and the rest of the world seems to have widened in the last few years.
Furthermore, SSA’s financial sector continues to be less developed even when compared to other emerging
market regions. Findings from a benchmarking study commissioned by the World Bank during 2012 support
this assessment. Examining various indicators in relation to financial system access, depth, efficiency
and stability, the findings suggest that SSA performed weakest on average.

Please download the Banking in Africa Report 2015 to read the full report and get more information on the current state of banking in Nigeria, Ghana and Kenya.

David Okwara

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