Kenya is poised to become the fourth most banked economy in sub-Saharan Africa by 2020, predicts a report by the Economic Intelligence Unit, a London-based economic forecasting firm. The country’s asset base is expected to more than triple to $48 billion within the next decade, from $15 billion last year.

But Tanzania and Uganda’s banking industries are expected to outpace Kenya’s growth rate — the two countries’ asset base will more than quintuple from $5.6 billion to $28 billion in the case of Tanzania, and from $3.5 billion to $18 billion for Uganda.

Currently, Kenya dominates the East African banking scene, accounting for over 60 per cent of the region’s total assets, which are worth about $25 billion. The EIU predicts that the country will continue to be the regional leader in banking, even though by 2020, its share of the anticipated $94 billion total regional assets will shrink to 52 per cent, as the financial sectors in Tanzania and Uganda deepen.

But East Africa pales in comparison with the growth expected of South Africa and the emerging economic powerhouses on the continent: Nigeria and Angola. Already, the South African banking industry boasts an asset base of $368 billion, 10 times more than that of Kenya, Tanzania and Uganda combined. This is expected to grow to $558 billion by 2020.

Nigeria is already extending its economic reach all over the continent, with banks like United Bank for Africa and Zenith International Bank among the top 10 multinationals in Africa. The size of the country’s banking market is poised to grow from $86 billion in 2010 to $289 billion by 2020. Angola’s asset base is already about the size of the EAC’s — $25 billion — and the EIU forecasts that it will swell to $262 billion by 2020.

The report indicates that the three main drivers of this development will be high rates of economic growth, financial deepening to fulfil huge unmet needs for basic financial services, and new technologies to provide them — particularly over mobile phones.

Kenya is already a global leader in mobile banking, a technology that is likely to bring millions of unbanked Africans into the formal economy, and support domestically financed credit extension. A recent report by Renaissance Capital states that the continent boasts of about 500 million mobile phones, and that with every 10 additional phones per 100 people, the continent’s GDP growth rises by between 0.6 and 1.2 per cent.

In addition, high GDP growth is expected to be sustained in many African economies, driven in large part by “recent resource discoveries and a global commodity supercycle that will sustain high prices for oil and gas, basic metals and a variety of agricultural products,” according to the EIU.

The loan-to-deposit ratio in the domestic market is also very healthy, meaning that local banks have cash to spare. Renaissance Capital asserts that domestic financing is a viable option for more and more governments as they seek capital for investment, stating that, “Progress is obvious in Kenya where the government can now borrow for 20 years in local currency, which could help pave the way for long-term investment projects to be financed locally.”

Positive policy decisions will also reinforce the trend. The EIU reports that many countries in sub-Saharan Africa have adopted pro-growth economic policies, including openness to foreign lenders and building the infrastructure to expand banking systems, such as issuing sovereign bonds and constructing national and regional markets for stocks and bonds.

The EIU anticipates financial sector deepening across the continent, resulting from more households and businesses saving, borrowing and transferring money to and from banks, and using these services more intensely. Bank deposits and assets are thus projected to expand at 1.5 times the rate of GDP growth. Under this scenario, assets will grow by 248 per cent to $1.37 trillion, while deposits will expand by 270 per cent to $1.1 trillion by 2020.

The expansion of the banking industry will not be uniform across the continent, however. Growth will be strongest in poorly served countries that are enjoying new resource booms, including Angola, Uganda, Ghana and Tanzania. In each of these high-growth countries, the EIU foresees bank deposits and assets rising at least threefold in the next decade, which could grow much more quickly with financial sector deepening.