African countries south of the Sahara are poised to enjoy a surge in growth in their banking systems during this decade. The three main drivers of this development will be generally very high rates of economic growth, financial deepening to fulfil huge unmet needs for basic financial services and new technologies to provide them—particularly over mobile phones.
In this report we trace out two scenarios for the growth of the sector. In the conservative scenario, driven exclusively by economic expansion, we project that the industry in 16 key African economies will boost its financial assets by 178% to US$980bn by 2020. In the more likely scenario, driven by both economic growth and financial deepening, we foresee assets expanding by 248% to US$1.37trn at the end of the decade (see chart).
The boom will vary markedly across the continent, however. Banking is likely to enjoy its most rapid expansion in Angola, increasing assets at least fivefold by 2020, as that country experiences a surge in petroleum production and builds up an industry long hampered by civil war and economic malaise. Banks in a number of other economies—including Ghana, Tanzania and Uganda—will expand assets at least threefold over the same period.
Slower-growing markets will include South Africa, which is the financial powerhouse of the continent but will expand its own banking sector only modestly by 2020. Botswana and Namibia, two other economies with well-developed banking systems, are also slated to expand banking assets at rates below the regional average.
In most regards the region is trailing the rest of the world in developing the banking systems that are vital for stronger economic development and growth. However, in some key aspects Sub-Saharan Africa is leading other regions in ways that will allow it to rapidly catch up, or even leapfrog forward, in the next decade and beyond. The continent’s industry is a leader in mobile banking and other innovative approaches to reaching new customers. Most of its markets are also unusually open among emerging markets to foreign banks and microfinance firms. More than anything else, it offers huge unmet financial needs in a world largely marked by excessive debt and leverage.
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