The Secret of Africa’s Banking Boom: Mobility
Friday, August 17, 2012
While U.S. and European banks suffer hangovers from the Great Recession and continued shock waves inside the eurozone, Africa’s top lenders have never looked stronger or been more ambitious. Why is a continent better known for political instability and foreign aid riding a banking boom characterized by aggressive pan-African expansion and swelling balance sheets?
The surprising fact is Africa’s poor represent a vast reserve of untapped capital waiting to be channeled into consumer and small-businesses loans, and for infrastructure development. By some estimates, 95% of the nearly 500 million adults in sub-Saharan Africa earning less than $10 a day have no access to bank accounts. If they did, the formal banking system could get its hands on as much as $59 billion in new deposits.
Now, however, this pool of slumbering wealth has intersected with advances in mobile-banking technology that make it possible to use cell phones for routine banking transactions, such as money transfers and deposits, instead of conventional city bank branches. That development –spurred by the rapid diffusion of inexpensive mobile networks in a continent with limited landlines — has sparked a revolution in retail banking from Nigeria to Kenya to Mozambique.