By Stanley Opara with agency report

A growth of 15 per cent a year is expected until 2020 in the banking sector across Africa, with the biggest opportunities anticipated in retail banking.

Consultancy Bain & Company disclosed this in a study released on Sunday, saying mobile phone banking would be a key driver of the growth.

Africa’s $107bn financial services industry would log impressive growth for the rest of the decade as more banks target the continent’s emerging middle class, Reuters quoted the study as showing.

Retail banking would see the biggest growth, and would account for nearly 40 per cent of the continent’s banking revenue by 2020, helped by rapid adoption of mobile phone banking, Bain said in the study released ahead of an Africa Investment Summit.

It said the opportunities and challenges presented by this bourgeoning African market would be addressed by executives, investors and politicians at the summit, to be held between March 7-10, in Johannesburg, Nairobi and Lagos.

Africa is home to a billion people, vast commodity wealth and rising disposable incomes, as well as poor infrastructure and often shoddy corporate governance, making the continent both a substantial opportunity and challenge for regional and global financial firms.

“The prospects for banking on the African continent are tremendous,” the Deputy Chief Executive Officer of Standard Bank, Africa’s largest bank by assets, Sim Tshabalala, said in an interview with Reuters last week.

“But to be able to compete in Africa you need people on the ground who know the terrain,” he added.

Bain Partner, Mr. Andrew Tymms, however, said the continent’s financial services industry would continue to grow at a compound annual rate of 15 per cent to 2020, outpacing gross domestic product growth.

“Retail banking will grow faster than corporate banking to make up 38 per cent of banking revenue by 2020, bringing in the previously unbanked population and shifting the experienced to sophisticated products,” Tymms said.

The study, “Financial Services in Africa: A Decade of Opportunities” reckoned financial firms would make up 19 per cent of Africa’s Gross Domestic Product by 2020, compared with 11 per cent in 2009.

While big Western financial firms are keen to talk about trade between Africa and Asia, and their desire to win more African deals, the study is also a cautionary tale for overly optimistic bankers.

The biggest opportunities would be in the “mass retail segment”, serving customers with low incomes and the rural poor, many of whom did not previously have bank accounts, the study showed.

It added, ”That is not a high-margin business, nor an easy one for banks unfamiliar with local markets.”

Nevertheless, regional banks such as South Africa’s Standard and Togo-based pan-African bank, Ecobank Transnational, are rolling out services such as kiosk banking and community lending programmes to widen their reach.

Source: Punch