The Impact of Pan-African Banks on Financial Development in Sub-Saharan Africa: The NSIA Approach

The overarching objective of national financial inclusion policies and strategies in sub-Saharan African countries is to significantly increase the rate of bank penetration among economically active citizens. This goal is shared by all African financial and banking system stakeholders who have undertaken to facilitate access to financial services, not only for the population but for businesses, under the leadership of the various national regulators.

The report "Impact of Pan-African Banks on Financial Development in Sub-Saharan Africa" from ODI's Growth Research Program perfectly highlights this priority, combining it with financial deepening and stability.

The rapid growth and development of pan-African banks is a response to this issue.

Historically, access to banking and finance was considered a privilege reserved for large corporations and the elite, primarily due to unreasonable terms and conditions by some financial institutions to deliver basic services. Pan-African banks have contributed significantly to mitigating this perception by changing the old paradigm; henceforth, bankers solicit for and take on clients from all social classes.

The analysis by the ODI Growth Research Program revealed the following compelling findings:

• Financial services are more available to companies than to individuals;
• In financing local players (SMEs), pan-African banks take more risk than foreign banks, which may weaken their balance sheets;
• Pan-African banks are more vulnerable in the event of systemic shocks in one of their operating markets.

In addition to these findings, it is important to mention the following:

• Banking regulations, which have become increasingly restrictive over the years (BASEL II/III), certainly help strengthen banks' financial position and resilience while forcing them to expose themselves to only a marginal share of their clientele to limit the demand on their capital.
• At the international level, stringent AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) regulations require pan-African banks to implement procedures perceived as intrusive by clients, the majority of whom carry out cash-based transactions - a reflection of the informal nature of the real economy within countries in the subregion.
• Risk assessment and evaluation measures are applied equally to big firms and SMEs/SMIs, even though it is common knowledge that SMEs/SMIs have a high risk profile due to:

• Unreliable financial records due to weak financial management systems;
• Non-compliance with loan repayment terms as a result of delays in payment of invoices by large corporations, government agencies or parastatals;
• Difficulties of geographic traceability and the quasi-non-absence of  recourse mechanisms in the event of a default and lack of eligible collateral under the new prudential arrangement.

In summary, pan-African banks will reinforce their role by adapting their strategies to the market trends in their areas of operation while relying on the continued support of the sector's regulatory authorities and supervising agencies.

Like the NSIA Group, they will continue to sustain and implement activities on different fronts, namely:

1. Expand operations geographically (gradual roll-out of branches in various countries in the sub-region) and the range of products and services offered. For the past 25 years, the NSIA Group has been developing banking and insurance services to meet the needs of a rapidly changing African population, particularly the growing middle class;
2. Co-operation: instead of pitting itself against all players in the sector, NSIA has undertaken to work towards financial inclusion by addressing the needs of an under-banked clientele. The institution has joined forces with ORANGE to launch ORANGE BANK Africa in Côte d'Ivoire, with regional ambitions in the medium term.
3. Build governance capacity: the NSIA Group regularly conducts training seminars/workshops for managers and directors of its various entities to keep abreast of developments likely to impact the skills of its executive staff.
4. Digitization: in addition to its physical presence through its network of local branches, NSIA BANK focuses on improving the customer experience by automating its services. Various electronic services are offered, and more are being developed to achieve broader coverage and enhance financial inclusion.

Although African banking systems are still evolving, they have made significant progress in the last few years. Improvements in regulatory frameworks have enhanced the strength and resilience of banks within our region. Innovation and digitalization have facilitated the expansion of financial products and services to a larger market. African banks will continue to improve their operational and corporate performance in an increasingly competitive and challenging business environment.

About the author

Anicet Patrick OKOMA is an experienced banker with over fifteen years of experience in reputable banking institutions. He began his career in 2004 at BIAO (now NSIA Bank) as a Corporate Relations Officer. He then moved to BICICI from 2006 to 2007 in the same position, before joining the Ivorian affiliate of the Ecobank Group in 2007, first as a local Head of Division, then as Regional Head for Corporate Banking, WAEMU. In November 2012, he joined UBA CI as Director, Corporate Banking, then Coris Bank CI as Deputy Director-General in July 2015. He was recently appointed NSIA Group Deputy Managing Director for NSIA Banque Benin S.A.