Banking in Africa: Financing transformation amid uncertainty

Results from a survey of 
African banking groups

Jean-Philippe Stijns

Summary 
This chapter takes stock of trends and strategic issues affecting banking groups in Africa, based 
on the results of the fourth edition of the European Investment Bank’s survey of banking groups 
in Africa (see Appendix 1). Our survey’s coverage has been extended to include the whole African 
continent, and the sample size has been increased in this edition from 25 to 46 banking groups 
operating in Africa. The 2020 sample of banking groups is composed of a mix of pan-African banks, 
sub-regional banks, foreign banks operating in Africa and national banks. A continental approach 
has the advantage over a regional approach of better encompassing banking group relationships 
that span multiple sub-regions. The overall message coming out of responses to this year’s survey 
is one of cautious optimism about a gradual return to growth and stability in African banking 
markets. 
In line with the generally improving economic conditions in most African countries, most groups 
are in expansionary mode, mostly thanks to organic growth but also due to greenfield and 
brownfield investments. Nevertheless, some groups are still in consolidation mode, especially in 
the short term. The banking groups report improvements in terms of loan origination and funding 
conditions. Non-performing loans (NPLs) seem to be coming under control in most banking groups 
but they are still on the rise in some groups. Efforts to comply with Basel II and Basel III standards 
are also reported. 
The groups are planning to expand their loan books, identifying manufacturing and agriculture 
as their top sectoral focuses at the moment. In addition, most banking groups report putting a 
very high priority on SME financing as a growth area. However, the banking groups identify some 
specific constraints to lending to SMEs: a shortage of bankable projects, a lack of effective 
collateral, a lack of managerial capacity, informality and a high default rate amongst SMEs. Most 
banking groups consider portfolio guarantee products as important but, unfortunately, guarantee 
needs are still predominantly unmet. Similarly, banking groups report a strong demand for local 
currency financing. Some groups also report that their most important technological needs 
concern credit risk management and lending technology. 
In terms of products and service focus, African banking groups are still emphasising investment 
on e-banking and mobile banking services. Some groups are also deploying or planning the 
development of fintech, with the main focus on facilitating mobile money, electronic transfers 
and back-office operations. Banking groups view telecom companies primarily as partners rather 
than as competitors for the provision of mobile money services. It is commercial banks that 
banking groups consider as their most direct competition. A fair proportion of groups are also 
investing in lending-related fintech, including data analytics and blockchain technology.

Banking in Africa: Financing transformation amid uncertainty