Global lenders want share of retail banking market in East Africa

East Africa is becoming a fertile hunting ground for foreign banks looking to explore the booming retail market that has seen KCB and Equity Bank assets reach over Kshs 1 trillion (8 $.62 billion) each, thanks to the increase in the number of customers and loan portfolios.

The EastAfrican has learned that global players are eyeing the regional banking market, with Nigeria’s Access Bank Plc and Egyptian International Commercial Bank (CIB) acquiring Kenyan lenders as launching pads in the seven-member bloc comprising Kenya, Egypt. Uganda, Tanzania, Burundi, Uganda, South Sudan and Democratic Republic of Congo.

“The banking model has shown that there is merit in good expansion. If you are able to expand and grow your balance sheet, you are also able to increase your profitability and East Africa is where the next frontier of growth is seen to be,” said Paul Mwai, Managing Director of AIB-AXIS Capital Ltd and Vice Chairman. Chairman of the Nairobi Stock Exchange (NSE).

A survey by consultancy PricewaterhouseCoopers (PwC) in 2019 showed that global lenders were expressing interest in the East African market as local banks became more regionally competitive with their mobile money solutions, agencies and their digital platforms that appeal to East Africans. a population growth rate of three percent, and with increasing financial inclusion and use of financial services, East Africa’s banking sector is poised to grow substantially and profitable in the years to come,” the survey states. digital channels offered by banks in the East African region, while smart Automated Teller Machines (ATMs) and cardless services are lagging behind in all countries other than Rwanda,” he said. -he adds.

Three Nigerian banks have gained a foothold in East Africa.

In 2020, Access Bank Plc, Nigeria’s largest retail bank, more than doubled its investment in its Rwandan subsidiary after acquiring Kenya’s Transnational Bank. Access Bank Plc now owns 75% of the shares of its Rwandan subsidiary, which has eight branches across the country.

With over 36 million customers across the continent, Access Bank has targeted the East African banking market as part of its five-year plan (2018-2022) which aims to consolidate its retail banking business and wholesale and position the institution as the most respected African bank.

Nigerian BanksOther Nigerian banks operating in the region include United Bank of Africa (UBA) and Guaranty Trust Bank (GT Bank), which acquired a 70% stake in Kenyan-owned Fina Bank Group in 2013.

Egypt’s largest private sector bank by assets – Commercial International Bank (CIB) – is seeking to acquire more banks to strengthen its presence in the East African region and help finance Egyptian investors in seeking opportunities in Africa’s fastest growing region.

The lender, with over $27.24 billion in assets, acquired a 51% stake in Kenyan Mayfair Bank in 2020, seeing the deal as a stepping stone to the rest of Africa.

CIB has the ambition to become the region’s banking giant in the financing of businesses, SMEs and trade. “East Africa has been identified as the most attractive region for the CIB. The region is home to some of the fastest growing economies in the world, while providing a platform for CIB to learn and embrace the progress being made towards digital transformation and financial inclusion,” the lender said.

KCB, which had a balance sheet of Ksh 1.13 trillion ($9.74 billion) in the fiscal year ended December 31, 2021, has operations in Kenya, Uganda, Tanzania, Rwanda, in Burundi and South Sudan and is in the process of acquiring an undisclosed lender in DR Congo. It also manages a representative office in Ethiopia. “The benefits of our regional expansion continue to contribute positively to KCB’s performance,” said CEO Joshua Oigara.

Equity Group, on the other hand, with assets worth Ksh 1.3 trillion ($11.2 billion), is present in six countries including DR Congo, Kenya, Uganda, Tanzania, South Sudan, Rwanda and a representative office in Ethiopia. The next generation of banks could be much more transactional, for example by being leaders in payments. Size will also be important; there will be niche players, but those who engage in inclusive retail banking will be the most successful,” said Equity Group CEO James Mwangi. proper segmentation of customer base and services specific to those segments rather than focusing exclusively on a niche within a segment,” he said. “There is also a feeling that East Africa East and West Africa have a number of similarities in terms of demographics and in terms of the services they offer,” he added. .said that the next generation of banks could be much more transactional, for example by being leaders in payments. But banks that engage in inclusive retail banking will be the most successful.

Currently, the East African banking market is dominated by Kenya’s two largest retail banks, KCB and Equity, with the merger between NIC Bank and Commercial Bank of Africa (CBA) creating the third largest bank. expansion opportunities to strengthen our regional participation, accelerate growth and maintain long-term sustainable performance.

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