African banks reassert themselves in local markets


Published on:

Global banks have their uses but local firms are proving best adapted to this rising region.

International banks are expanding in Africa. Citi, for example, is looking to open full-service operations in three more African countries in the next 12 to 18 months, bringing its Africa country network to 18. But as Africa’s economy grows, African financial institutions are increasingly successful.

National authorities are understandably keen to promote national banks, especially given the colonial associations of Standard Chartered, Crédit Agricole et al. And, as in other sectors and regions, local firms are better adapted to the environment. Take the success of Somali money transfer firm Dahabshiil.

Global banks bring technological advantages, notably in cash management. International firms retain better links to global capital and trade networks too. But banks from the developed world (Standard Chartered included) tend to cater to an elite. Banks such as Kenya’s Equity Bank mine far deeper markets, with innovations such as using cows as collateral.

Since 2005, Togo-based Ecobank has grown into Africa’s most widespread bank. It has formed an alliance with Bank of China and now has more than 750 branches in 32 countries, helping Africa’s much-needed integration.

Nigerian challengers

In Nigeria, Guaranty Trust Bank and Zenith Bank have grown from creation in the early 1990s to challenge incumbents UBA and First Bank (while UBA has developed a 20-country African network). In Kenya, Equity Bank and Kenya Commercial Bank – both expanding in East Africa – overtook Standard Chartered and Barclays’ local operations in the first quarter in terms of profitability.

Since its 2007 privatization, Zambia National Commercial Bank has similarly grown to challenge Barclays and Standard Chartered. Consumer loans firm Letshego is doing the same thing in Botswana. Letshego is also expanding in East and Southern Africa.

JPMorgan and other global investment banks are opening more Africa offices. But firms such as Chapel Hill, Vetiva and Afrinvest (all in Lagos) are benefiting from burgeoning local capital markets. Kenyan investment bank Dyer and Blair is now just as active elsewhere in East Africa as it is at home.

Ecobank Capital, launched last year, is already driving forward local-currency markets, most recently with an oil-backed sovereign bond for Chad. Adapting to markets such as this has given local institutions the edge over global banks in Africa.

see also:
Regional Awards for Excellence 2011: Africa
African Awards for Excellence 2011: By country