Webinar Report - Recent Trends in the Banking Sectors in Sub-Saharan Africa
The Making Finance Work for Africa Partnership (MFW4A) and the European investment Bank (EIB) organized the first of a series of webinars, entitled “Recent Trends in the Banking Sectors in Sub-Saharan Africa”, on 17 January 2019.
Based on the key findings of a survey conducted by the EIB Economics Department, in collaboration with senior economists and researchers from the private sector, the Webinar examine the recent trends in the Sub-Saharan African banking sectors, relying on a survey of banking groups operating on the continent. The study, available in English and French, has been launched on November 22nd, 2018 in Addis Ababa.
This session was moderated by Guy Menan, MFW4A Research and Knowledge Manager, and facilitated by speakers including:
- Jean-Philippe Stijns, Senior Economist, European Investment Bank (EIB)
- Adéline Pelletier, Lecturer, University of London
- Jared Osoro, Director, Kenya Bankers Association (KBA) Centre for Research on Financial markets and Policy
The webinar began with a presentation by Jean-Philippe Stijns who summarizes the key results of the survey in terms of Banks’ market focus in Sub-Saharan Africa, main obstacles to SMEs lending, needs for portfolio guarantees and demand for loans by currency in comparison with the market trends. The surveyed banks indicated that the bulk of their operations in 2017 related to SMEs (60%), followed by retail banking (30%), then large local firms (around 10%) and finally multinationals. As for the main obstacles to the financing of SMEs by African banks, respondents have identified: the lack of guarantee (34%), the risk of default (33%), managerial failures (17%) and costs related to lack of information, supervision and credit bureaus.
In terms of local currency, dollar and euro requests, most requests were more than 50% market-responsive, while 30% and 15% of banks surveyed reported having higher needs than market for local currencies and the dollar. As for the opportunities highlighted by the banks, they indicated a booming competitive climate and a growing interest in financing for SMEs. In addition, the banks surveyed expressed their growing need for loans and guarantees in local currency while highlighting market opportunities related to their contribution to financial inclusion.
Jean-Philippe concluded his presentation by highlighting some of the challenges banks face on the continent: the protection of new borrowers and clients, the need to control the risks of non-performing loans, and the need to terms of financing and capacity building to support SME financing. Adeline Pelletier's presentation focused on the rapid improvement of financial inclusion in sub-Saharan Africa, particularly given the strong penetration of mobile financial services in this region, compared to other regions of the world. Intrinsically, the banking sector in sub-Saharan Africa has evolved rather significantly in terms of agency networks, clients and contribution to the financing of the regional economy, compared to the state of the art 5 years ago.
The third panellist, Jared Osoro, discussed the issues of SME financing and financial inclusion in East Africa. He began by pointing out the role of SMEs in the East African Community (EAC) as drivers of the economic growth, accounting for over 75% of enterprises in the region and significantly impacting the demand for financing to support their development process. SMEs have informed the regional orientation of banks in EAC, by shaping the banking landscape from a market positioning standpoint. Furthermore, partnerships between banks and Mobile Network Operators (MNOs) have seen technology been a key enabler of financial markets; thus providing access to payments, savings and credit services to SMEs in the EAC.
However, access to financial services by SMEs remains insufficient even if progress have been made in reducing the weight of the informal economy through mobile money services and their partnerships with banks. Technology-based lending has been associated with increasing non-performing loans. Despite advances in recent years, Banks and other financial inclusion actors in the region are still facing the need to balance cost of financial services with access, local currency funding with hard currency funding, and credit offer with capital requirements (equity).
The webinar ended with an enlightening Q&A session you could access by downloading the recording HERE.