Banking in Africa: A brief overview of banking of the agri sector in Africa

This note is specially prepared for the NTU-SBF Centre for African Studies, a private-public think tank operating out of Singapore.

Executive Summary

The banking sector globally is going through a challenging time with a slowdown in revenue growth and lower RoEs for the banks. African banking stands out in the sector as a segment that offers huge growth potential over the coming years due to the following factors:

  • Low penetration of banking products in both retail and wholesale segments, which is less than half the global average
  • Growth in GDP across major markets
  • Rise in middle-class population, most of whom are seeking banking solutions
  • Investments in African infrastructure and commodities sectors from overseas players, enabling M&A and project financing

As such, we believe that Africa will be a beacon of future growth in global banking.

Africa today has the second-fastest-growing banking market – taking retail and wholesale banking together – in the world. Between 2012 and 2017, African banking-revenue pools grew at a compound annual growth rate of 11% in constant 2017 exchange rates. McKinsey expects the African banking market to remain a growth leader going forward, growing at a rate of 8.5% over the next five years, which is very attractive as compared to other geographies.

On the flip side, the African banking sector has to deal with challenges that could impact the above projected future growth. Some of these are low income levels in many countries, the widespread use of cash in most economies, and poor coverage of credit bureaus. But some banks are already tapping the opportunities inherent in these challenges. For example, they are harnessing Africa’s widespread mobile phone coverage to create low-price offerings and innovative distribution models.

In this note, we examine the African banking landscape, the key participants, some of the key themes, such as digital banking, which are emerging on the continent. We have also provided a brief overview of the banking of the agri sector in Africa.

African banking landscape

African banking is dominated by strong regional banking groups, and characterised by the presence of selective global banks in the region. While foreign affiliates of regional African banking groups already outnumber foreign affiliates of both global and emerging banking groups operating in sub-Saharan Africa (including South African banking groups), global banking groups still account for the largest share of assets in sub-Saharan Africa’s banking industry. The foreign affiliates of global banking groups have long benefited from scale effects, while African banking groups are now beginning to reap such benefits. According to financial statements, African banking groups exhibit lower profitability compared to other banks operating in sub-Saharan Africa, but the difference is narrowing over time. Lower profitability largely stems from the lower quality of their portfolio and lower, albeit improving, operational efficiency. Moreover, the quality of the loan book seems to be poorer for the foreign affiliates of African banking groups than for the affiliates of global and emerging banking groups. Indeed, African banking groups are known to be somewhat more exposed to the SME segment, which exhibits higher default risk than large corporates.

Regional African banks are still looking towards their home markets for development and growth and there are very few pan-African banks. Standard Bank, the South African bank, is present in 20 African countries and is Africa’s largest bank by assets. Any geographic expansion is focused on markets like Nigeria, Ghana and East Africa. The top banks’ listing is dominated by ‘the Big Four’ South African Banks – Standard Bank, ABSA, First Rand Bank and Nedbank. Nigerian Banks, such as First Bank of Nigeria, Access Bank, Guaranty Trust Bank and Zenith Bank, are emerging as dynamic regional players together with Ecobank (in which Nedbank has a 20% stake), Kenya Commercial Bank and Equity Bank.

South Africa

South Africa has a developed and well-regulated banking system, which compares favourably with those of industrialised countries. Although the South African banking sector has been through a period of volatility and change in the past, it has attracted a lot of interest from abroad with a number of foreign banks establishing a presence in the country and others acquiring stakes in major banks. South Africa also has a sophisticated capital and financial market with an active stock exchange and higher financial penetration than the rest of Africa. The major banks are Standard Bank, ABSA, Nedbank, First Rand Bank (‘the Big Four’ as indicated above), and more recently also Capitec, the fastest-growing retail bank in South Africa, whose initial success has been banking the mass market. Capitec has overtaken Nedbank in terms of the number of customers and are making inroads into the middle income market traditionally owned by the Big Four.


Nigeria has 24 commercial banks, four merchant banks and three foreign bank representatives (following the consolidation of its 89 banks).

All banks are regulated by the Central Bank of Nigeria (CBN) and are required to adhere to certain prudential regulations as specified in the Prudential Guidelines by the CBN. Currently, Nigeria has eight domestic systemically important banks (DSIBs), whose assets are 70% of the total industry assets:

  • FBN Holdings
  • GT Bank
  • Zenith Bank Plc
  • UBA Plc
  • Access Bank
  • Skye Bank Plc
  • Ecobank Nigeria
  • Diamond Bank Plc

The DSIB regulatory and supervisory framework was implemented in 2014 by CBN and the Nigeria Deposit Insurance Corporation (NDIC) and came into effect in 2015. These efforts were intended to foster financial stability following the global financial crisis, which brought about the need to strengthen the regulation of systematically important financial institutions (SIFIs).


In Ghana there are a total of 35 licensed commercial banks, coupled with 140 rural and community banks. In addition, there are 37 savings and loans companies, four representative offices of foreign banks, 24 finance houses, two remittance companies, three credit reference bureaus, 392 active forex bureaus and one mortgage finance company.

Despite the large number of banks in the country, there is still a considerable portion of the population in Ghana that is unbanked and as such Ghana has some way to go to achieve financial inclusion. The financial inclusion percentage has, however, continued to rise and was at 40% in 2017, compared to 30% in 2015. This has resulted largely from the growth of mobile money solutions in Ghana.

DSIB has been implemented in Ghana with five identified banks and there is an ongoing review of these banks and mechanisms to monitor them. The five banks are:

  • Ecobank
  • Barclays
  • SCB
  • GCB
  • Unibank


In Kenya there are a total of 40 commercial banks, with Chase Bank and Imperial Bank under receivership, one mortgage finance company, 12 micro-finance banks, eight representative offices of foreign banks, 86 foreign exchange bureaus, 14 money remittance providers and three credit reference bureaus.

Financial inclusion is very high in Kenya, with the percentage of the population living within three kilometres of a financial services access point at close to 80%. Kenya has achieved this by being at the forefront of digitisation. It is the leading market in Africa for mobile money penetration and mobile financial services have risen to be the preferred method for people to access financial services in the country.

Kenya’s banking environment is in the midst of a consolidation with heightened M&A activity over the last four years, the most recent being the acquisition of Habib Bank Limited by Diamond Trust Bank in March 2017. The largest banks are KCB Group, Co-Op Bank, Diamond Trust, Equity Holdings, StanChart and Barclays.

Rest of East Africa (Tanzania, Uganda, Rwanda)

The East African Region (Kenya, Uganda, Tanzania and Rwanda) is made up of 149 banks, with 25 of them listed in the security exchanges of their respective countries. In most of the East African countries, the markets are dominated by a few key players, like Stanbic in Uganda, with the average market share by assets of the four largest banks being 21.3%. Most of the smaller banks do not have relevant market share and scale. This situation is likely to lead to a consolidation in the banking sector in the region. Some of the effects of consolidation will include increased mergers, acquisitions and buyouts of smaller banks by bigger, well capitalised banks.

Other sub-Saharan Africa Countries (Mauritius, Zambia, Namibia)

Mauritius has 22 banks: seven local, 10 foreign-owned subsidiaries, four foreign branches and one joint venture. Many corporates use Mauritius as a regional treasury centre for Africa, given its favourable tax regime. As such, banks support these treasury activities in Mauritius.

Zambia has 19 banks – of these, eight are subsidiaries of foreign banks, nine are local privately-owned and two are partly-owned by the government. All the banks are regulated by the Bank of Zambia (BOZ). Zambia has a population of 15.5 million, bringing the commercial banks to population ratio to about 1.2x, which implies an adequately banked population.

Namibia has 10 banks versus a population of 2.5 million, implying commercial banks to population ratio to about 4x. This means Namibia is over-banked. All the banks are regulated by the Bank of Namibia (BON).

The biggest banks in these countries are the State Bank of Mauritius, Mauritius Commercial Bank, StanChart Zambia and FNB Namibia.

Key themes in digital banking in Africa and success of mobile money

Digitisation is more about innovation than technology, requiring a cultural transformation within banks and financial institutions.

Changes associated with the recent digitisation revolution have been especially disruptive – driving innovation – in Africa’s financial services sector. Rapid innovation, especially the rise of fintech, is shifting the way clients use banks to transact and manage business. This is driving profound shifts in what clients expect banks to do, reshaping both the conceptualisation of what banks are and how they support clients. At the same time, the speed at which data is being created and made available, has also increased. This has created huge potential for clients in Africa – as well as the banks and other financial institutions and platforms that support them.

Banks are moving away from being product-centric towards becoming more client-centric. This is being achieved by focusing on understanding and improving the client experience along the entire client journey and full value chain. Technological advances such as big data, artificial intelligence, cognitive computing and automation allow banks to serve their clients remotely and digitally across their ecosystem and value chain – no matter how differentiated or dispersed. Core functionality available through application programming interfaces (APIs) and micro services, for example, present great opportunities for both banks and their clients. These and other digital platforms provide improved client engagement, while data analytics allow banks to better understand their clients and markets.

Standard Bank is currently in the process of developing an integrated open digital platform. The remote sensing elements of this platform include a weather module able to provide accurate historical data as well as 10-day projections on weather for specific farming regions or units. Standard Bank expects that the information that this platform will provide, will enable insurers and re-insurers to better assess, manage and price risk in crop insurance.

Digitisation has allowed Standard Bank to participate in distributor and supplier financing in a much more meaningful way. For example, the bank is now able to bank the beverage value chain by providing cash-less real-time collections, which is driven by investment in digital payment solutions. In simple terms, a distributor can pay the brewery in real time using his smart phone and the stock can be released to the distributor immediately. This has obvious benefits to the entire ecosystem. Stanbic Bank in Kenya was also the first bank to provide a solution for real-time electronic tea payments via a system that the bank developed and deployed for the East Africa Tea Traders Association (EATTA) in 2010. The system allows tea buyers and brokers to securely settle purchases through Stanbic’s Electronic Bill Board (EBB) system – seamlessly and within the stipulated timelines set by EATTA. During settlement, the EBB system automatically deducts and remits monies to all the participants involved in the transaction. Standard Bank has also created a tobacco payment platform and hosts mobile money payments and collections with wallet-to-bank and bank-to-wallet applications (like the phenomenally successful M-Pesa in East Africa).

Digital financial services are contributing to financial development and financial inclusion in sub-Saharan Africa. Sub-Saharan Africa leads the way in the adoption of mobile banking. In rural populations, traditional bank intermediaries do not reach sparsely populated areas and the cost of their services is frequently prohibitive for low-income households and small businesses. The recent surge in mobile money observed in many sub-Saharan African countries, has been facilitated by low transaction costs, growing innovations, and strong growth in mobile phone subscriptions. Access to financial services in sub-Saharan Africa has increased steadily in recent years. Today, there is less need to travel long distances to access financial services. The development of mobile payment systems has helped to integrate large sections of the population into the financial system, especially in East Africa.

The significant increase in the share of the included population is best exemplified by the case of Rwanda, where 89% of the population had some kind of financial access in 2016, up from 75% 4 years earlier (IMF).

Kenya – mobile money leader, an example to be followed by other countries

Kenya’s story sheds light on the steps needed to undertake a digital revolution in a country. Kenya still enjoys the advantages of an early start in pushing the frontier of financial inclusion through digital financial services. Also, in Kenya, a much larger share of the population is within five kilometres of a “financial access touch point” and had many more such touch points per person than was the case in other countries in the region. In less than 10 years, the use of mobile phone-based money has grown from zero to more than 75% as a share of the adult population, and the insurance sector has expanded, targeting Kenya’s emerging middle class.

Kenya’s success in digitalisation was facilitated by adaptive and flexible regulatory frameworks, reforms in financial infrastructure, and rapid improvements in skills and capacity. This virtuous circle can be divided into four phases: (i) expansion of the mobile phone technological platform; (ii) introduction of virtual savings accounts using a digital financial services platform complemented by virtual banking services; (iii) use of transaction, savings, and financial operations data from the digital financial services platform to generate credit scores and evaluate and price microcredit risk; and (iv) expansion of digital financial services for cross-border payments and international remittances.

To achieve these impressive results, banks have worked closely with telecommunications companies, allowing them a bigger market share vis-à-vis other emerging markets.

Financial inclusion has opened the door for potentially game-changing opportunities: innovative pension plan support and government-targeted social protection, expansion of regional payment systems within regional blocks, enforcement of policies to stop money laundering and the financing of terrorism, and a better environment for forward-looking monetary policy to replace years of financial repression and reactive policies. Financial inclusion makes saving easier and enables the accumulation and diversification of assets, boosting economic activity in the process.

Brief overview of banking of the agri sector in Africa

Financing of trade & supply chain

Standard Bank’s view of trade and supply chain financing across 20 markets in Africa (collectively accounting for approximately 80% of sub-Saharan Africa’s GDP) is that there is an increasing need for more sophisticated working capital solutions. This trend to sophistication is largely driven by European and Asian multinational companies entering Africa and these companies are seeking to apply the same trade and supply chain financing structures that they use in their home markets. In particular, they are looking for innovative solutions that better support their overall working capital requirements – especially as they expand within Africa. Generally, these multinationals require optimised corporate balance sheet management, supported by various supply chain finance techniques capable of addressing supplier and/or buyer side balance sheet optimization and working capital requirements.

Specific structures/solutions are as follows:

  • Purchase and lending-based supply chain finance techniques, such as receivables discounting and payables finance.
  • Affordable risk-managed balance sheet optimisation solutions. This is driving financial institutions to take on more direct risk on a non-recourse basis.
  • A growing demand for solutions that help balance working capital needs with the counter party risk inherent in multinational companies’ value chains. The fact that multinational companies are showing a willingness to share risks in some of these solutions, also indicates that, increasingly in Africa, multinational companies are under pressure to respond to strain and risks in their supply chains.
  • Increased requirements for supply chain finance lending base techniques – aimed at supporting the valuechain. The financing of distributors demonstrates how multinational companies require their banking partners to support their value chains.
  • An increase in regional or local corporate demand for other supply chain finance lending base techniques, like invoice financing and pre-shipment financing.
  • Increasing demand for simple and easy use digital solutions that meet the growing working capital needs of corporates in Africa.

The integration of digital solutions into companies’ corporate supply chains. This is increasingly a capability that multinational companies expect their financial institutions to provide in Africa. The degree of integration would depend on the complexity of each client’s supply chain funding needs.

Collateral-based lending and related products

Structured trade and commodity financing (STCF) is used extensively in and across Africa to finance business activities. The tenure of this financing typically ranges anywhere betweenthree and 18 months, depending on the nature of the commodity being financed and the seasonality of the business.

STCF enables financing institutions to offer funding to those clients whose balance sheets would not normally warrant the levels of funding required in their ordinary working capital cycles. These structures can range from pure collateral management agreements (CMA), where stock is monitored and recorded by independent third parties on behalf of the funder, to less onerous stock repos and borrowing-based structures. A prime example of this form of financing can be found in Ghana where the Ghana Cocoa Board has managed the country’s cocoa exports and receivables through a syndicated CMA facility for a number of years.

Some of the challenges experienced by funders in offering STCF facilities include:

  • Competence and experience of third party collateral managers in and across Africa.
  • Limited scale and availability of storage facilities.
  • Depth of commodity exchanges in many countries.
  • Onerous regulations in key jurisdictions.
  • Political influence in commodity pricing.

Smallholder financing

Banks don’t typically have a separate product for smallholder financing. Standard Bank’s current view is to take a value-chain approach, working with anchors (typically the large corporate plantation owners) in specific value chains. The anchor normally has to have a vested interest in the commodity, as their business model relies on having access to the produce of the smallholders. To ensure that the bank delivers both a seamless and streamlined process across the rest of the value chain, Standard Bank would usually group the other smallholders’ applications in a special purpose vehicle – with the anchor assisting with monitoring and reporting, on crop estimates and progress for instance. In terms of risk appetite, Standard Bank generally caps smallholder finance to ensure that the bank’s book is not over-exposed to smallholder farmer risk.

Agri processing sector

Standard Bank offers limited non-recourse project finance where fixed, long-term offtake contracts with creditworthy counterparties are available. Alternatively, funding will require recourse to the shareholders.

Upstream/plantation financing – for both large & small projects

Standard Bank does finance plantations in instances where the bank can gain sufficient understanding (and detail) on the sponsor behind the project. Standard Bank also needs a complete view and understanding of the value chain, as well as a clear understanding of the agricultural risk and experience of the sponsor. Other important factors influencing plantation financing decisions include: nucleus versus grower funding, regulatory environment, exchange-traded versus cash crops, and overall size of the counterparty’s balance sheet. Development finance institutions, government support programmes and regional funds (like the World Bank, European Union funds, etc.), as well as NGOs (like the Clinton Foundation, etc.), all play an important role in supporting plantation financing in Africa.


African banking is at an exciting phase of its evolution with good opportunities for future growth and the emergence of strong regional banking groups. The advent of digitisation in the sector has provided the required thrust to bring more of the continent’s population into the banking net, leading to financial inclusion and better access to financial services.

The NTU-SBF Centre for African Studies is a think-tank that was established in Singapore in 2014. It was founded by means of a public-private partnership where 5 corporates came together to commit the seed funding, which was matched in equal measure by the government of Singapore.


Naveen Subramaniam is based in Singapore and has over 15 years of corporate and investment banking experience, primarily in the Commodities and Agribusiness sector in ASEAN and South Asia. He is a qualified Chartered Accountant from India and joined the Corporate Treasury in Olam International Limited in January 2017.

Junaid Jadwat is based in Johannesburg and is the Global Agribusiness Head, Consumer Client Coverage for Standard Bank. He has 19 years banking experience with the last 10 years in investment banking and client coverage across the full suite of corporate and investment banking products in Sub Saharan Africa, United Kingdom and United States of America.

Mike Blades is currently CEO of Standard Advisory Asia based in Hong Kong. He has over 25 years of corporate and investment banking experience with Standard Bank, in Africa, China and London. Mike has extensive experience in dealing with multinational companies, coupled with considerable on-the-ground banking experience in Sub-Saharan Africa, more recently in East Africa.