The ‘advantage of backwardness’ according to World Bank chief economist, Justin Lin, is that developing countries, “latecomers to technological and industrial frontiers, can borrow technology, industry and institutions from the advanced countries at low risk and costs.” If developing countries know how to tap into the technological pool already available, he adds, they can grow at an annual rate several times that of high-income countries for decades. This, he asserts, has been behind China’s phenomenal growth over the past 20 years.
To that list one can add India, Brazil, the Asian tigers and now Africa. The most obvious example has been in telecommunications and banking. The digital age has done more to advance the continent’s banking industry than any other development has. The last decade has seen a greater expansion of banking, both domestically and cross-border, than the previous five decades put together. Global multinationals have extended their reach to virtually every nook and cranny of the continent and African multinationals like Ecobank are even now reshaping the business culture of the continent.
Perhaps the greatest beneficiaries of this technological explosion have been the ordinary men and women, particularly those considered ‘unbankable’ only a few years ago. Now they form the ‘bottom billion’ of the pyramid and represent a sizeable and potent market in their own right.
The advances made in mobile-phone money transfers, many pioneered in Africa itself, have completely altered the commercial landscape of Africa. A number of economists attribute Africa’s sustained economic growth over the last 10 years to the application of technology in communications and the movement of capital.
Our Cover Story this month examines the impact of the technological revolution on African banking from a variety of perspectives.
We also take a comprehensive overview of the industry in West Africa. Nigeria, after a traumatic period which saw confidence in the industry plummet to perhaps its lowest ebb, is not only rebounding but doing so with typical Nigerian gusto.
After a relatively fallow period, the financial system is up and running – the Nigerian Stock Exchange has a new head, the central bank’s directives, harsh but necessary, appear to have instilled a sense of discipline, and competition has begun in earnest. But the signs are that those banks that survived the crisis more or less unscathed will emerge stronger, leaner and hungrier. Watch out, South African multinationals.
The special feature on West African banks also looks at developments in Ghana, where the industry is gearing itself to cope with the expected fresh activity in the wake of oil production and looks at advances made, among other countries, in Senegal and Liberia.
Talking of African multinationals, Nigeria’s Access Bank has been going from strength to strength. What has been particularly impressive about this bank is its commitment to corporate social responsibility and its seemingly endless drive to improve its performance. We profile the managing director and chief executive of the bank, Aigboje Aig-Imoukhuede.
On the other side of the continent, in East Africa, we pay a visit to Kenya’s leading financial institution, KCB, as it carries out a root-and-branch re-engineering of its entire organisation and positions itself to become the principal bank in the expanded East African federation.
Our focus on African insurance in this issue reveals that the industry is very unevenly spread across the continent. South Africa contains some of the most sophisticated and specialised firms in the world but the rest of the continent is still remarkably underinsured. The potential this industry offers is, quite simply, staggering. While Islamic banking has been making steady strides across the continent, it would appear that Islamic insurance, takaful, could gain even greater acceptance even in countries without sizeable Muslim populations.
To start off our regular round-up of African bourses, we take a closer look at Ethiopian Commodity Exchange. This fairly young institution has quietly gone about its business but has already made huge strides. It has proved a boon both to local producers of commodities as well as international buyers. It is a model that we believe can, and should be, replicated in other African countries where commodity trade forms a significant portion of overall trade.