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Time is getting short to invest in African financial services

Companies looking to enter Africa’s financial services space need to move quickly as the window of opportunity is rapidly closing.

Barclays has made a number of investments in Africa's financial services space.

Barclays has made a number of investments in Africa's financial services space.

In a report titled At the tipping point: African financial services come of age, consulting firm Accenture notes that due to growing income levels, many Africans are embracing financial services. However, once consumers have access to a particular bank or insurer, they are not likely to switch easily.

“So companies that hang back now may find that the early movers have already gained an unassailable lead at a defining moment,” says Accenture. “Decisions that companies make now with regard to Africa will shape their future ability to participate in the continent’s rapid expansion over the coming years.”

The report says that many African and international banks and financial services firms are already positioning themselves to capitalise on the continent’s underserved markets.

In recent years there has been considerable merger and acquisition activity in the financial services area. To name a few: Barclays has bought stakes in South Africa’s Absa bank and Nile Bank in Uganda; the Industrial and Commercial Bank of China (ICBC) acquired a 20% share in South Africa-based Standard Bank; and Portugal’s Banco Espírito Santo bought 25.1% of Mozambique’s Moza Banco. “Soon there will be fewer . . . companies to buy,” says Accenture.

Many lenders have also secured partnerships with mobile network operators to develop their mobile banking capabilities. “Telecom providers typically establish close partnerships with only a few selected banks, so their dance cards could soon be filled.”

Accenture has developed a Tipping Point Index, which ranks the maturity and attractiveness of Africa’s financial markets. Key factors such as financial infrastructure, consumer financial services and economic development have been used to segment African countries into four distinct groups.

Established markets
Key characteristics: Mature financial markets. Large stock and bond markets. High percentage of bank assets and retail deposits relative to GDP. High percentage of people with bank accounts.
Countries: South Africa, Mauritius

Forging ahead
Key characteristics: Fairly large, mid-level income economies. Relatively well-developed institutional frameworks, but awaiting critical financial reforms. Emerging stock and bond markets. Lower percentage of people with bank accounts. More difficult business environments than established markets.
Countries: Nigeria, Botswana

Next movers
Key characteristics: In the process of overcoming barriers of low income, limited financial access and institutional or governance deficiencies. May lack fully developed stock and bond markets.
Countries: Kenya, Ghana, Senegal, Zambia, Namibia, Uganda

Transitional economies
Key characteristics: Constrained by poverty. Little or no access to financial services. Difficult business environments. Lack of financial infrastructure.
Countries: Gabon, Angola, Tanzania, Mozambique, Ethiopia, Cameroon, Sudan.

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