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Opportunities in financial services sector in Africa
The continent’s growing economy, increased political stability, and willingness to trade with international partners presents a significant opportunity for financial service entities to expand their customer base and derive revenue from traditional banking products.
Robust growth from financial services companies throughout Africa is playing a significant role in economic development for the continent, according to Sumesh Rahavendra of DHL Express Sub-Saharan Africa (SSA).
Rahavendra adds that retail banking, in particular, is a key focus for both international and regional banks, and requires these entities to extend their footprint and make financial services products available in regions previously unexplored. According to KPMG’s 2014 Financial Services in Africa report, retail banking in SSA is projected to grow at a compound annual rate of 15 percent between now and 2020, bringing the sector’s contribution to the continent’s collective GDP to 19 percent from an estimated 11 percent in 2009.
According to Rahavendra, opportunities for financial service companies moving into Africa include trade finance for corporate customers and retail banking for private individuals, which appear to be the most immediate needs in the region. “Retail banking in particular is a key opportunity, as the demand for formal banking services that enable the provision of credit and loans for vehicles and homes are growing.”
There is also a trend where multinational banking institutions partner with local entities that are familiar with the region. This allows them to meet the needs of their customers across diverse regions. Similarly, having access to partners that are familiar with the continent is the key to success for many banks expanding into the region. “It is necessary to partner with suppliers that have the security, flexibility and reliability to offer quality and reliable service, despite the many challenges that the region may present.
“Being open to opportunities in historically unattractive countries is also key to success in Africa. Whilst perceived risks may be high, the rewards are equally so since Africans are discerning consumers and readily pay for quality products and services.”