Global lenders want a piece of East Africa’s retail banking market

Wednesday May 18 2022
KCB Group Chairman Andrew Kairu and Rwanda Prime Minister Édouard Ngirente.

KCB Group Chairman Andrew Kairu and Rwanda Prime Minister Édouard Ngirente during the launch of BPR Bank Rwanda PLC in Kigali. PHOTO | FILE


East Africa is becoming fertile hunting ground for foreign banks seeking to explore the booming retail market that has seen KCB and Equity banks assets rise to over Ksh1 trillion ($8.62 billion) each, buoyed by expanding customer numbers and loan books.

Foothold in East Africa

The EastAfrican has learnt that global players are eyeing the regional banking market, with Nigeria’s Access Bank Plc and Egyptian Commercial International Bank (CIB) acquiring Kenyan lenders as launching pads into the seven-member bloc comprising Kenya, Uganda, Tanzania, Burundi, Uganda, South Sudan and the Democratic Republic of Congo.

“The banking model has shown that there is a merit to good expansion. If you are able to expand and grow your balance sheet then you are also able to increase your profitability and East Africa is where the next growth frontier is considered to be,” said Paul Mwai, the Chief Executive of AIB-AXIS Capital Ltd and vice chairman of the Nairobi Securities Exchange (NSE).

A survey conducted by consultancy firm PricewaterhouseCoopers (PwC) in 2019 showed that global lenders were expressing interest in the East African market as local banks become more competitive regionally with their mobile money solutions, agency models and digital platforms that appeal to East Africans.

“With a population growth rate of three percent, and with increasing financial inclusion and uptake of financial services, East Africa’s banking sector is poised to grow substantially and profitably in the years to come,” the survey said.


“Internet and mobile banking are the most popular digital channels offered by banks in the East Africa region, whereas intelligent automated teller machines (ATMs) and cardless services lag behind in all countries other than Rwanda,” it added.

Three Nigerian banks have set a foothold in East Africa.

In 2020, Access Bank Plc, Nigeria’s largest retail bank, more than doubled its investment in its Rwandan subsidiary after acquiring Kenya’s Transnational Bank. Access Bank Plc now owns 75 per cent shareholding in its Rwandan subsidiary, which has eight branches across the country.

With more than 36 million customers across the continent, Access Bank has targeted East Africa’s banking market as part of its five-year plan (2018-2022) that seeks to shore up its retail and wholesale banking business and position the institution as the world’s most respected African bank.

Nigerian banks

Other Nigerian banks operating in the region include United Bank of Africa (UBA) and Guaranty Trust Bank (GT Bank), which acquired 70 per cent shareholding in Kenyan-owned Fina Bank Group in 2013.

Egypt’s largest private sector bank by assets – Commercial International Bank (CIB) – is seeking to acquire more banks to strengthen its presence in the East African region and help finance Egyptian investors looking for opportunities in Africa’s fastest growing region.

The lender, with over $27.24 billion worth of assets, acquired a 51 percent stake in Kenyan Mayfair Bank in 2020, viewing the deal as a springboard to the rest of the Africa.

CIB harbours ambition of becoming the region’s banking giant in corporate, SME funding and trade financing.

“East Africa has been identified as the most attractive region for CIB to do business. The region is home to some of the fastest growing economies in the world, while it will also provide a platform for CIB to learn and adopt the strides taken toward digital transformation and financial inclusion,” the lender said.

KCB, whose balance sheet stood at Ksh1.13 trillion ($9.74 billion) during the year ended December 31, 2021, has operations in Kenya, Uganda, Tanzania, Rwanda, Burundi and South Sudan and is in the process of acquiring an undisclosed lender in the DR Congo. It also runs a representative office in Ethiopia.

“The benefits of our regional expansion continue to positively contribute to the KCB’s performance,” said CEO Joshua Oigara.

Equity Group on the other hand, with a Ksh1.3 trillion ($11.2 billion) worth of assets, has presence in six countries including the DR Congo, Kenya, Uganda, Tanzania, South Sudan, Rwanda, and a representative office in Ethiopia.

“The next generation of banks could be much more transactional, such as by being the leaders in payments. Size will also be important; there will be niche players, but those who engage in inclusive mass banking will be the most successful,” said Equity Group CEO James Mwangi.

“Mass banks will provide inclusive services, with proper customer segmentation and delivering specific services to these segments rather than focusing exclusively on a niche within a segment,” he said.

“There is also a sentiment that East Africa and West Africa have got some quite a number of similarities in terms of the demographics and in terms of the services that they offer,” he added.

said the next generation of banks could be much more transactional, such as by being the leaders in payments. But banks that engage in inclusive mass banking will be the most successful.

Currently, the East African banking market is dominated by Kenya’s two largest retail banks, KCB and Equity, with the concluded merger between NIC Bank and Commercial Bank of Africa (CBA) creating the third largest bank.

“KCB will continue exploring and pursuing attractive regional expansion opportunities to enhance our regional participation, accelerate growth and maintain sustainable long-term performance.”