Responsible Finance Forum

Sector Report: Banking in Sub-Saharan Africa

16 December 2015
Source:  KPMG

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 report intends to explore the above- mentioned topics in more detail.