The retail market in East Africa has been dubbed the new frontier for money-making by lenders looking to boost revenues and defend market share, and as a result, foreign banks have been brought into the conflict for control of the industry.
Foreign multinational banking behemoths that traditionally thrived on doing business with huge corporations and high-net-worth individuals are progressively changing their operating methods to benefit the hitherto ignored and neglected small enterprises and individual consumers.
Due to growing client bases and loan books, Kenya’s Kenya Commercial Bank and Equity Bank saw their combined value increase to almost Ksh1 trillion ($7.3 billion) in this market, as seen in The East African, a news publication centered around news in East Africa.
‘High volume, poor margin’ activities aimed at the low-income portion of the population are the strategy that has increased non-funded earnings for local banks.
According to a 2018 McKinsey&Company report, banks in Africa’s mass market would be their next major development area.
However, according to a research titled “Roaring to Life: Growth and Innovation in African retail banking,” how quickly retail banking penetration rises in Africa over the coming years will rely on how daring banks are in innovating. According to the report, the middle segments, which are those with yearly incomes between $6,000 and $36,000, would account for 70% of the expansion in Africa’s retail banking revenue pools through 2025.
Nigeria’s Access Bank Plc and Egypt’s Commercial International Bank are two other international competitors eyeing the local retail banking industry.
The CEO of Equity Group, James Mwangi, predicted last year that while the new generation of banks may focus more on transactions, inclusive mass banking will be the key to their success.
“Mass banks will provide inclusive services, with proper customer segmentation and delivering specific services to these segments rather than focusing exclusively on a niche within a segment,” he said.
In 2020, after purchasing Kenya’s Transnational Bank with an eye toward the region’s retail market, Access Bank Plc, Nigeria’s largest retail bank doubled its stake in its Rwandan affiliate.
On the other side, Commercial International Bank (CIB), Egypt’s largest private sector bank by assets, entirely bought Kenyan Mayfair Bank in 2020, marking the continent’s first takeover. CIB saw the merger as a stepping stone to the rest of Africa, particularly East Africa.
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The World Bank has halted funding for more than $1 billion in humanitarian and development projects in the Democratic Republic of Congo after the government abruptly liquidated the project fund. As part of the $1.04 billion total, $91 million had already been granted for the projects, according to the letter, but the bank was still awaiting paperwork on their progress.
The change was due to “the evolution of the legal framework governing public institutions,” according to his statement. Albert Zeufack, the country’s head of operations for the World Bank, stated in a letter dated May 12 that the organization had learned about the choice through the media.
“Before being able to continue to commit the project funds, the government and the World Bank should agree on transitional measures… in order to ensure that the funds are used for the intended purposes,” he said via the letter.
A spokesman for the Congo’s finance ministry stated that he was awaiting approval from the president before making a statement.
Speaking on behalf of the administration, Tina Salama said there would be transitional management of the fund and ruled out any funding suspension. “I think arrangements have been made,” she said. She did not respond to questions about the $91 million.
According to Valery Madianga, the head of a Congolese organization that specializes in public finance auditing, the hasty decision to alter the financing structure is an example of weak governance.
“How can it be … that a public service, which signed a $1 billion program contract with the World Bank, has been dissolved or has changed its social purpose without the latter being aware of it?” he said.
In a letter sent last week, four of Congo’s leading opposition MPs asked the heads of the World Bank, the African Development Bank, and the International Monetary Fund to examine their finances there because they suspected misappropriation.
