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Banking in Africa there is a great chance

         Date: 2012-03-24

           Tag: Banking, Banking in Africa chance

Summary: Most African banks had little exposure to the global risks that have weakened Western banks, said African Development Bank chief economist Mthuli Ncube.

African banks, which have attracted international attention for resilience in the difficult global economy, are also providing advice on multi-billion-dollar deals involving foreign companies looking for business on the continent.

Late last year, one of Africa's largest banks, Standard Bank of South Africa, announced it had secured a $125 million loan from 18 banks around the world, a demonstration of the confidence of foreign investors.

Most African banks had little exposure to the global risks that have weakened Western banks, said African Development Bank chief economist Mthuli Ncube. Instead, he said, they have expanded beyond their borders within the continent.

They have found plenty of business. The economies of sub-Saharan Africa are expected to grow 5.5 percent this year. That is second only to Asian developing countries, which are expected to grow 7.3 percent. The global average is 3.3 percent.

The number of Africans with enough disposable income to be called middle-class has been increasing about 3.8 percent a year since the 1980s, Ncube said, slightly ahead of population growth. Banks and other business see a market there.

Now M-Pesa -- pesa means money in Swahili -- "is part of the local parlance, and it means money transfer," said Anthony Mwai, IBM's manager for East Africa. IBM has been expanding business with African banks.

In a practice now common around the world, users load money onto their phones at small brokers or from bank accounts. Then they use it to pay rent or bills, or send money to another M-Pesa user, who can visit a broker to get cash.

Banks that once saw M-Pesa as competition have gone into partnership with Safaricom. Such innovations have allowed banks to reach customers without building branches in places like Diepsloot.

For the most part, African banks haven't experienced problems that befell their Western counterparts.

Ncube, of the African Development Bank, said African central banks are generally cautious, perhaps because many African economies have been through painful restructurings at the hands of the International Monetary Fund, something some European economies are now confronting. Banking regulations reflect the caution, and African banks have kept a tight rein on lending.

The poverty of many African countries has meant their economies and banks are somewhat isolated from global trends, while China's growing appetite for raw materials has benefited African producers of minerals and timber.

Still, in 2009, Nigeria's central bank had to provide a $2.55 billion bailout for troubled banks. Analysts blamed lax regulations exploited by corrupt bankers. Ncube insisted that Nigeria's central bank did the right thing in the end.

The banks are healthier today and preparing for more growth.

Last year, IBM signed 20 deals worth $200 million to provide services for banks across Africa. IBM's Africa business has grown by double digits over the past three years, "and the growth we see, we see continuing," spokesman Jonathan Batty said.

Banks have asked for IBM's help modernizing their computer networks to handle more customers and to connect with customers through mobile phone banking and other technology, said Mwai, IBM's manager for East Africa.

In 2009, a government-backed project culminated in a high-speed undersea cable connecting East Africa with the rest of the world, and banks were among those to benefit from increased Internet speeds and lower costs.

Zweli Manyathi, an executive with South Africa's Standard Bank, says banks now need to put their ingenuity to work developing small business, to ensure more of the economic growth that has made the African financial sector attractive.

Manyathi is calling on banks, government and aid groups to find innovative ways to train fledgling businesspeople, many of whom in Africa lack the skills to identify markets, predict costs or take other steps to turn their ideas into thriving enterprises.


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