#55 October 2018

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OCTOBER 2018 | ISSUE 55

OCTOBER 2018 | ISSUE 55

PROMOTING GROWTH MOHAMED BERRO, Chief Executive Officer, Emirates NBD Egypt

PROMOTING GROWTH A CPI Financial Publication

MOHAMED BERRO, Chief Executive Officer, Emirates NBD Egypt

Dubai Technology and Media Free Zone Authority

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Investor Day is here!

FinTech Hive invites you to join us and our partners for the culmination of our Fintech Accelerator Programme’s second cohort as they showcase this year’s innovative Fintech technologies.

Register to attend by visiting: FinTechHive.ae/InvestorDay

Location: Music Hall, Jumeirah Zabeel Saray Hotel, Palm Jumeirah, Dubai Date: 27 November, 2018

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EDITOR’S NOTE

H

ello and welcome to the October issue of Banker Africa.

This month we feature the CEO of Emirates NBD Egypt Mohamed Berro on the front cover. Egypt has had something of a tumultuous few years and authorities have engaged in a stringent economic reform programme (we have more coverage on this on page 18). Using this as the context of our discussion Berro spoke about what the future holds for the Egyptian economy and how Emirates NBD Egypt fits into the overall story of Egypt’s growth.

“The authorities have realised that the future requires a new set of skills and a new breed of people,” said Berro. “The Government is very much aligned with this transition and this is one of the few times that I have witnessed a comprehensive aligned set of measures that an economy or country has implemented in line with these shifting patterns.” The full interview can be found on page 22.

For our country focus this month we look to the East African nation of Tanzania.

Regionally the country has continued to be one of the best performers, and has averaged real GDP growth between 2013 and 2016 of at least seven per cent. 2017 was a harder year for the country, we covered this in Banker Africa #44, but it has since rebounded.

For the banking industry, growth levels in non-performing loans (NPLs) will continue to be a problem, with NPLs as a percentage of total loans growing from 6.8 per cent in 2014 to 12.6 per cent as of September 2017. Our full analysis begins on page 30.

Islamic finance has experienced significant growth worldwide in recent years, but in Africa despite its large Muslim population Shari’ah-compliant banking and finance products have not taken root. In a recent report Moody’s explored the prospects for Islamic finance on the continent and found that although African Sukuk issuance represents a very small percentage of global Sukuk issuance at 0.5 per cent we can expect to see significant growth in this issuance and overall Islamic banking assets in Africa. Our coverage of this report is on page 38. Indeed, this growth in Sukuk issuance can be used to help plug the continent’s infrastructure gap, an issue we explore in more detail on page 40.

With that I’ll let you get to reading.

Until our next issue, Matthew Amlôt

bankerme.net

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CONTENTS

OCTOBER 2018 | ISSUE 55

22

16

18

IN THE NEWS

8

News analysis: Protests test Abiy Ahmed premiership

COVER INTERVIEW

22 Promoting growth

10 Essential financial news from around the continent

11 Spotlight: Kenya OPINION

Banker Africa sat down for an exclusive interview with Mohamed Berro, Chief Executive Officer, Emirates NBD Egypt to discuss where the bank is heading in the future and the current state of affairs in the Egyptian economy

14 Lifting the lid on the black box of

COUNTRY FOCUS

informal trade in Africa

By Joachim Jarreau, Maître de conférence en économie, Université Paris Dauphine–PSL, Cristina Mitaritonna, Senior trade economist, CEPII, Sami Bensassi, Senior lecturer, University of Birmingham

16 The role of financial services

professionals in an automated world

By Gavin Smith, Head of Africa at deVere Acuma

MARKETS

18 Egypt walks the path to recovery

30 Reforms required

Tanzania is in need of reform to continue is impressive historical growth curve

TECHNOLOGY

46 Africa’s expanded partner and

technology universe reflects deepening engagement with global economy

48 The rise of the African digital bank 50 Transforming branch front end 52 Hyper-availability: the competitive edge for digital banks

INVESTMENTS

54 West Africa: the CIB perspective

ISLAMIC FINANCE

38 African Sukuk on the rise 40 Unlocking Islamic finance for

infrastructure

Dr Osman Babiker Ahmed, Lead Economist, IRTI-IDB Group, writes about the value that increasing the share of Islamic financing in infrastructure can produce

By Afamefuna Umeh, Head of Fixed Income, SSA, Exotix

EVENTS

58 The future of fintech

At Seamless East Africa the future of the banking and financial services industry took centre-stage

44 The future of green Sukuk

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ISSUE 55 | OCTOBER 2018

36

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MANAGING AFRICA’S GROWING PRIVATE HEALTH Demir Avigdor, Market Head, Africa & Europe Private Banking, Standard Chartered A CPI Financial Publication

MANAGING AFRICA'S GROWING PRIVATE WEALTH DEMIR AVIGDOR, Market Head, Africa & Europe Private Banking, Standard Chartered

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MOHAMED BERRO, Chief Executive Officer, Emirates NBD Egypt

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NEWS ANALYSIS

Ethiopia welcomed the President of Eritrea earlier this year in Addis Ababa (CREDIT: HAILU WUDINEH TSEGAYE/SHUTTERSTOCK).

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Recent violence and arrests in Ethiopia’s capital Addis Ababa has brought into question the administration's reform efforts

I

n April this year reformist Abiy Ahmed came to power as Prime Minister of Ethiopia. He has since introduced radical changes to Africa’s second most populous country, including freeing thousands of detainees and journalists, loosening Government control over the economy, welcoming once-banned opponents into mainstream politics and improving the country’s relations with neighbouring nations.

Indeed, Abiy has been credited as spearheading the historic peace agreement that Ethiopia has made with its neighbour Eritrea—the two countries signed a peace agreement in September ending a war that had technically lasted over 20 years and begun to normalise relations. Furthermore, Ethiopia has become part of an effort amongst its Horn of African neighbours to call for the UN to remove all economic sanctions on Eritrea.

However, in late September Ethiopia’s capital experienced violent unrest over several days that led to dozens of killings, mass arrests and a shutdown of internet.

Tension in Addis Ababa came down to long standing ethnic divisions. Problems began in mid-September when young ethnic Oromos started painting the colours of the Oromo Liberation Front across the capital.

Within Addis Ababa ethnic Oromos are something of a minority and other groups are significantly more prevalent, such as the Amhara who are the overwhelming majority in the city.

The Oromos are the largest ethnic group in Ethiopia as a whole, and the

Prime Minister Abiy Ahmed Ali met with International Monetary Fund Managing Director Christine Lagarde in late July (CREDIT: IMF/FLICKR).

attacks were reportedly targeted against ethnic minorities living in and around Addis Ababa. In the lead up to the protests Amnesty International reported that social media was awash with hate speech against non-Oromo groups and that security forces did nothing to intervene or protect those targeted. This has raised questions of whether Abiy, an Oromo, can successfully implement his agenda whilst sidestepping the deep ethnic divisions endemic in the East African country.

The administration’s tactics used during the protests smack of old tactics used by previous regimes when met with difficult challenges. It also shines a spotlight on how fragile and difficult it is to implement swift political reforms in a country with a large, overwhelming young population looking to experience the advantages due

to them as one of the fastest growing countries in the world.

Ethiopia’s history of ethnicity becoming enshrined at a federal level has given ethnic parties and their politics the legal foundation and legitimacy to flourish.

This makes the problem of ethnic rivalry particularly intractable in Ethiopia, even in comparison to a continent in which ethnic tension is common.

Abiy is now faced with the challenge of reducing this tension and creating a societal framework in which crossethnic communication and growth can succeed. In addition, Abiy may also need to investigate how the common can step back from institutionalising ethnicity to the degree to which it has currently and reduce the legitimacy of organisations pursuing purely single-group politics.

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IN THE NEWS

RATINGS REVIEW BANKS AND BUSINESSES S&P Global Ratings assigned its ‘AA+’ long-term and ‘A-1+’ short-term issuer credit ratings on New Development Bank (NDB). The outlook on the long-term rating is stable. NDB is a multilateral lending institution (MLI) established by Brazil, Russia, India, China, and South Africa (BRICS).

Fitch Ratings has assigned Arab Banking Corporation Tunisie (ABC Tunisie) Long- and Short-Term National Ratings of ‘AA+(tun)’ and ‘F1+(tun)’, respectively. Fitch has also assigned a ‘AA+(tun) rating to ABC Tunisie’s senior unsecured bond. The outlook is stable.

Fitch Ratings has affirmed South African state-owned Umgeni Water’s National Long-Term Rating and senior unsecured rating at ‘AA+(zaf)’, and National Short-Term Rating at ‘F1+(zaf)’. The Outlook on the Long-Term Rating is Stable.

Fitch Ratings has placed the ratings of MTN Group Limited (MTN), including the ‘BB+’ Issuer Default Rating (IDR), on rating watch negative (RWN).

ON THE RECORD African Development Bank and FAPA boost jobs for youth in Africa

The African Development Bank’s Fund for African Private Sector Assistance (FAPA) has provided funds totalling nearly $2 million to its Jobs for Youth in Africa initiative.

Egypt prepares global bond issue

Egypt plans to issue Eurobonds worth about $5 billion in the coming months. Mohamed Maait, Egypt’s Minister of Finance, said that the country will start promotional tours in the Asian markets, then Europe in preparation for issuing Eurobonds bonds.

Zimbabwean inflation quickens to highest rate in almost seven years

The country’s inflation has risen to its highest point in almost seven years in August as food-price growth increased. Consumer prices increased 4.8 per cent from a year earlier, the Harare-based Zimbabwe National Statistics Agency said in an emailed statement to Bloomberg, the highest since December 2011.

SOVEREIGNS Moody’s Investors Service changed their outlook on the Government of Egypt’s long-term issuer ratings to positive from stable and has affirmed the B3 issuer ratings.

S&P Global Ratings raised its foreign currency long- and short-term sovereign credit ratings on the Republic of Congo-Brazzaville to ‘B-/B’ from ‘CCC+/C’. The outlook is stable.

S&P Global Ratings raised its long-term foreign and local currency sovereign credit ratings on Ghana to ‘B’ from ‘B-’. The outlook is stable.

Fitch Ratings has affirmed Mozambique’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘RD’ (Restricted Default). There is no Outlook on the IDR.

UK suspends aid to Zambia amid corruption investigation

On Twitter British High Commissioner for Zambia, Fergus Cochrane-Dyet, stated that the, “UK [has] frozen all bilateral funding to Zambian Govt in light of potential concerns until audit results known. UKAid takes zerotolerance approach to fraud & corruption.” The UK has historically been the country’s biggest donor.

Zim general warns on foreign bases in Djibouti

“The establishment foreign bases and the involvement of external forces in the conflicts on the Horn of Africa is a worrisome development,” said Major General Trust Magoba, currently special advisor to the African Union office of Peace and Security.

General Magoba was referring to land adjoining a narrow strait that runs past Djibouti on the only route between the Indian Ocean and Suez, where the US, France and China have stationed their military.

(CREDIT: YURIY BOYKO/SHUTTERSTOCK)

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NEWS SPOTLIGHT KENYA

Kenyan lawmakers approve new tax on fuel products, speaker rules

Despite the restrictions imposed upon the Kenyan banking sector, the major financial institutions have still seen increased profits (CREDIT: OLIVIER LE MOAL/SHUTTERSTOCK).

Bank profits up 19 per cent in rate cap era Eight of Kenya’s top commercial banks that account for more than 90 per cent of listed lenders’ income have cut costs to the tune of millions of shillings whilst total income has risen for H1 2018. These cost cuts have offset the impact that the interest rate cap in place since 2016 has had on the industry, new data shows.

Equity Bank, KCB, Co-Op, Standard Chartered, Stanbic, NIC, Diamond Trust Bank and Barclays have reportedly cut total costs to around KES 82.5 billion, a reduction of over

The Kenyan parliament voted in favour of an eight per cent value-added tax on petroleum products, its speaker said, despite claims by some legislators opposed to the levy that the motion was defeated.

Justin Muturi said that while records showed there were 352 lawmakers in parliament, while constitutionally only 349 seats are available, he’d uphold a vote by acclamation that passed the clause.

“The clause, which was under consideration at that point, was carried,” Muturi said to shouts of zero, in reference to zero per cent VAT. “We will proceed with the next order.”

While the government initially wanted a VAT rate of 16 per cent, President Uhuru Kenyatta was forced to slash it to eight per cent after many Kenyans complained the levy introduced on 1 September was too onerous. [BLOOMBERG]

KES 700 million. Meanwhile total income has risen 8.7 per cent to KES 151 billion over the course of the first six months of 2018.

Banks are expected to once again raise lending rates should the rate cap be removed or altered. The removal of the cap had been floated as an idea earlier this year, but the cap was instead maintained, and the law amended to change the floor on the deposit rate to allow each bank to set their own rate.

Kenya holds key rate at three-year low as inflation seen steady The Monetary Policy Committee, which was fully constituted with nine members for the first time in five years, kept the rate at nine per cent, central bank Governor Patrick Njoroge said in a statement emailed Tuesday from the capital, Nairobi. That was in line with all 11 projections in a Bloomberg survey.

“Overall inflation is expected to rise in the near-term, following the implementation of valueadded tax on petroleum products in September 2018 and its impact on other prices, as well as increases in international oil prices,” Njoroge said. “However, it is expected to remain within

the target range due to lower food prices reflecting favourable weather.”

The central bank of East Africa’s biggest economy unexpectedly cut the rate in July, citing below-potential growth. While the MPC has said there is room for a more accommodative stance, price pressures due to the introduction of a tax on fuel and the decision by lawmakers to not repeal a law capping commercial borrowing costs at 400 basis points above the key rate is complicating the regulator’s policy-setting ability. [BLOOMBERG]

Fuel products will now be subject to an eight per cent value added tax (CREDIT: AKLION/SHUTTERSTOCK).

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IN THE NEWS

A QUICK WORD

“The blue economy can be the engine of economic growth, the basis of socio-economic development and industrialisation for many African countries, if well utilised. The maritime industry, for example, is estimated at over $1 trillion, and there are other related and emerging sectors of tourism, offshore renewable energy, aquaculture, seabed extractive industries, marine biotechnology and bio prospecting,”

NIGERIA

Nigeria sees ‘happy’ resolution to $8.1 billion dispute with MTN

After coming out all guns blazing, Nigeria’s central bank surrendered some ground in its tussle with MTN Group Ltd., pledging that a dispute over the repatriation of $8.1 billion in dividends from the country will soon be resolved. Nigerian authorities are changing their tone after coming under criticism that the impasse with MTN and lenders including Citigroup Inc., Standard Chartered Plc, Standard Bank Group Ltd. and Lagos-based Diamond Bank Plc threatened to spook investors. The regulator had initially demanded MTN and the banks refund the money, spurring the biggest collapse in MTN’s stock in 20 years.

MTN’s shares rose 2.6 per cent by the close in Johannesburg, gaining for a fifth straight day after the company last week announced it provided extra information that may lead to an “equitable resolution.” That pared losses to 23 per cent since 29 August, the day before the central bank demanded the company return the money. [Bloomberg]

— Said Adejumobi, Southern Africa Director, Economic Commission for Africa

For these stories and more, visit www.bankerafrica.com

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Egypt’s structural reforms key for sustainable development, says IMF

LIBYA EGYPT

Christine Lagarde, the International Monetary Fund (IMF)’s Managing Director, praised Egypt’s economy saying it was showing ‘strong signs of recovery’ under a three-year reform plan. Lagarde has praised Egypt’s economy under a three-year reform plan and stressed the importance of structural reforms to achieve more sustainable development.

In a statement, Lagarde said that Egypt’s economic reforms will help achieve more sustainable, inclusive and private-sector led growth which will help create jobs for youths while ensuring adequate resources are available for social protection.

DJIBOUTI

SOUTH SUDAN

ZAMBIA

Restraint against Djibouti Port Company continues

The court has extended the order to prohibit interference with DP World’s right to manage Doraleh Container Terminal S.A. The High Court of England and Wales in London has continued the injunction first made on 31 August 2018, prohibiting the Government of Djibouti’s port company, Port de Djibouti S.A. (PDSA) from interfering with the management of the joint venture company, Doraleh Container Terminal S.A. (DCT).

On 31 August, the Court issued a without notice injunction against PDSA, as shareholder in DCT, prohibiting the following actions: It shall not act as if the joint venture agreement with DP World has been terminated.

It shall not appoint new directors or remove DP World’s nominated directors without its consent.

It shall not cause the DCT joint venture company to act on “Reserved Matters” (being matters contractually reserved to DP World) without DP World’s consent.

It shall not instruct or cause DCT to give instructions to Standard Chartered Bank in London to transfer funds to Djibouti.

South Africa holds rate as recession trumps market turmoil

SOUTH AFRICA

The Monetary Policy Committee voted to hold the repurchase rate at 6.5 per cent Thursday. The South African Reserve Bank held its key interest rate at a two-year low as the economy struggles through a recession and policy makers warned that investor sentiment toward emerging markets is a risk to the currency and adds to inflation pressures.

The Monetary Policy Committee voted to hold the repurchase rate at 6.5 per cent Thursday. Three of the MPC’s seven members votes to increase the rate by 25 basis points, a deviation from the July and May decisions, which were unanimous for holds.

bankerafrica.net

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OPINION

LIFTING THE LID

ON THE BLACK BOX OF INFORMAL TRADE IN AFRICA

By Joachim Jarreau, Maître de conférence en économie, Université Paris Dauphine – PSL, Cristina Mitaritonna, Senior trade economist, CEPII, Sami Bensassi, Senior lecturer, University of Birmingham

T

he share of internal trade in Africa remains low, as reflected by official statistics. This is despite numerous regional trade agreements that have led to tariffs removal within the trading blocs. At least in principle.

There are a host of shortcomings that limit trade: non-tariffs barriers, red tape and insufficient infrastructure. Tariff barriers remain high outside areas covered by the agreements. Enhancing trade integration between African countries could yield large economic gains. This idea motivated the latest initiative for integration, the continental free trade area.

However, a large part of cross-border trade between African countries is informal.

It either avoids customs entirely, or goes through official posts but is not recorded.

Informal trade is difficult to measure. Most studies have relied on estimates based on partial surveys, or on accounting exercises.

Informal trade is pervasive amongst agricultural goods (CREDIT: VLADIMIR ZHOGA/SHUTTERSTOCK).

They concluded that a substantial share of Africa’s regional trade was informal, on the order of 30 per cent to 40 per cent.

Informal trade is pervasive for agricultural goods as well as many industrial goods.

Some traders are entirely informal; others are registered businesses but escape trade regulations and duties nonetheless.

This gap in the measurement of actual trade is problematic for trade policy.

Why is it so pervasive, and what should governments do about it?

Our recently published study goes someway to filling the gap by looking into the magnitude, composition and determinants of informal trade in Benin.

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WHAT WE FOUND In 2011, the national statistics of Benin identified 171 non-official border points to conduct a survey of informal trade. As in many African countries, informal trade is pervasive in Benin. It operates in the open, and is tolerated, for the most part, by officials. Each border post was surveyed for a period of ten days. Each trader crossing the border (in either direction) was asked a short questionnaire about products and quantities traded, prices, origin and destination.

The rate of response to the survey was high. This means that, for the first time, there’s a representative sample covering all informal trade at a country’s borders that can be compared with the official trade data such as customs data.

Using this data, our study confirms that informal trade is, in effect, a vital part of the trade system. For example, informal trade makes up the major part of trade in domestic products between Benin and Nigeria. Official statistics underestimate total trade by 50 per cent for imports, and by about 85 per cent for exports.

These figures are broadly in line with previous estimates for Sub Saharan countries. This confirms that trade statistics on the continent suffer from a serious blind spot.

Our study also shows that formal and informal trade differs by product composition. Informal trade isn’t restricted to livestock and a few agricultural goods.

Product and sector diversity is high. For example industrial products, such as textiles, agro-food, and transportation equipment are traded heavily on this channel.

Another noteworthy feature is that the product overlap between the formal and informal channels is very low: most goods are traded exclusively on one or the other.

This suggests that official statistics are also massively underestimating the product diversity in regional trade.

So why are some products traded formally, while others are exclusively traded informally?

3000 2500 2000 Formal

1500

Informal 1000 500 0 Imports

Exports

Monthly values of Benin’s informal and formal trade with Nigeria, million FCFA, September 2011. 2011 exchange rate: USD 1= FCFA 506. Re-exports, transit trade and gasoline trade are excluded. Customs, INSAE, authors’ calculations.

REASONS FOR TRADE INFORMALITY We estimate that products facing high tariffs are more likely to be traded informally. Nontariff barriers, such as sanitary and phytosanitary regulations, or technical barriers to trade (such as labelling requirements, quality standards), are also associated with more informality.

This suggests that complying with these regulations represents a cost for traders. They are therefore willing to avoid them by skipping the customs controls.

This raises serious questions around issues of product quality. There’s no doubt that controlling product quality and enforcing regulations is necessary for consumer protection. Frequent cases of food poisoning in Nigeria, and their association with informal trade show the importance of this issue.

The difficulty lies in distinguishing between enforcement and excessive requirements. For example, our research shows that a lot of perishable products are traded exclusively on the informal channel.

This suggests that traders aren’t avoiding formal channels because they want to smuggle products that don’t meet health and safety standards. They simply want to sell products that would otherwise be spoiled if kept for too long.

HOW TO ADDRESS TRADE INFORMALITY There is a great deal of evidence that trade

costs are high in Sub Saharan Africa.

This is due to inadequate infrastructure, excessive regulations and requirements at customs, as well as harassment and bribery. The pervasiveness of informal trade is a symptom of this.

Reducing tariffs should help formalise some of this informal trade. But it is difficult to predict by how much. It’s possible that incentives to go informal remain high for many traders, even under the continent’s proposed free trade agreement, especially if preferential treatment is costly or difficult to obtain.

Some authors suggest giving specific support to informal traders, for instance access to simplified trade regimes. The rationale for this is that there are too many obstacles – procedural and infrastructural – preventing informal traders from operating within the official framework.

Informal trade is, in effect, a vital part of the trade system on the continent, improving food security, and providing a source of income for a substantial share of the population. By reducing trade costs for a large share of (less visible) trade operators, specific facilitation measures could offer valuable opportunities to reduce poverty.

This article originally appeared on The Conversation Africa.

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OPINION

THE ROLE OF FINANCIAL SERVICES PROFESSIONALS IN AN AUTOMATED WORLD 16 page 16-17 DeVere 055.indd 16

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By Gavin Smith, Head of Africa at deVere Acuma

A

s many as 800 million jobs could be lost worldwide to automation, according to a study by the McKinsey Global Institute. However, the technology will also create new jobs, existing ones will be reshaped, and workers will be provided with unprecedented opportunities. Every sector will be impacted by this seismic shift—and financial services will be no exception. For instance, data capturing, bean counting and basic financial advice will soon be jobs of the past as machines and automated processes are introduced.

In the modern working environment, the kind of skills that will see a new kind of professional class rise will be highly technological, social and creative, as people increasingly learn how to work alongside the technology. In effect, it will take care of the jobs that previously used basic cognitive skills such as data generation, basic literacy and numeracy.

Nowadays, and certainly in the future, authenticity and interpersonal skills will be what will be most sought after. People should be interested and curious. While technical abilities may look good on one’s CV, their soft skills will be what sets them apart.

While it may be their authenticity and interpersonal skillset that gets them in the door, the employee of the future will still have to develop some sort of technological aptitude. The report by McKinsey, titled AI, Automation and the Future of Work cites “creativity, critical thinking and complex information processing” as some of the skills that will be in demand in the coming years. The kind of occupations that are likely to grow will be those that require a hands-on human intervention.

For younger generations entering the workforce, adapting to this new world is easier, including within the financial services sector, as they are generally more tech-savvy.

The traditional roles that financial planners, advisers and even analysts play today look nothing like they did a decade ago, and they will continue to evolve. In the past, people relied on financial advisers for advice on which insurance or investment products to choose. Today, people can ask Google, or hop over to YouTube channels to learn about specific products.

Accenture’s 2017 Global Distribution & Marketing Consumer Survey, focused on financial services providers, found that 74 per cent of the 33,000 people surveyed were willing to follow a computer’s recommendation on insurance products. Furthermore, 78 per cent of the respondents would be happy to receive the same kind of advice for their investment decisions when it came to asset allocation.

These results do not mean financial advisers will become obsolete. Rather, they will need to create value where machines can’t. For those looking to get into financial services, the ability to communicate authentically, empathise, and truly get a holistic understanding of

Gavin Smith

a client’s individual circumstances, needs and wants to help them achieve, and hopefully exceed, their financial goals will set them apart in the world of roboadvisers and YouTube finance bloggers.

This will mean that employees of the future will need to be effective when communicating ideas, be great listeners and think collaboratively. I believe those soft skills ensure a productive, collaborative and healthy working environment. They are highly valued and vital attributes that organisations are looking for in an increasingly competitive world.

While this might seem like a barrier to employment, it is now easier than ever to learn and adapt because of the scope of the internet. One can use the internet to research companies, their products. They can get access to mentors they wouldn’t ordinarily be able to encounter. There are already plenty of sites offer great selfdevelopment courses that people can pair with recognised qualifications in the financial services industry.

Once in the workforce, it will become important for people to stay atop of trends and current affairs and think critically about how these things will affect their clients—as this is how they’ll be able to add value. Individuals should possess a desire to learn and be taught—especially if they’re lacking in some of the technical skills required for the job.

In preparing new entrants to the industry, deVere Acuma aims to support them through an opportunity to apply for its flagship in-house graduate programme.

Each month individuals are carefully selected to participate in the programme as a trainee. These next generation professionals are introduced to financial products, innovative new fintech solutions, as well as in-depth one–to-one guidance by leading industry mentors, and formal qualifications. This programme identifies individuals that are able to set themselves apart and who exemplify these valuable attributes in order to grow in the financial services industry.

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MARKETS

EGYPT WALKS THE PATH TO RECOVERY

The Egyptian authorities reform plan has begun to show results (CREDIT: STANISLAW MIKULSKI/SHUTTERSTOCK).

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Egypt’s structural reforms key for sustainable development

T

he Egyptian economic situation has continued to improve during 2018 as a result of its ambitious and politically difficult economic reform programme. While the process required sacrifices in the short-term, the reforms were critical to stabilise the economy and lay the foundation for strong as well as the sustainable growth that will improve living standards for all Egyptians.

Egypt’s growth has continued to accelerate during 2017/18, rising to 5.2 per cent in H1 2018 from 4.2 per cent in 2016/17. The current account deficit has also declined sharply, reflecting the recovery in tourism and strong growth in remittances, while improved investor confidence has continued to support portfolio inflows. In addition, gross international reserves rose to $44 billion by end-April, equal to seven months of imports.

The annual headline inflation declined from 33 per cent in mid-2017 to around 13 per cent in April 2018, anchored by the well-calibrated monetary policy of the Central Bank Egypt (CBE).

Christine Lagarde, the International Monetary Fund (IMF)’s Managing Director, praised Egypt’s economy under a three-year reform plan and stressed the importance of structural reforms to achieve more sustainable development.

In a statement, Lagarde said that Egypt’s economic reforms will help achieve more sustainable, inclusive and private-sector led growth which will help create jobs for youths while ensuring adequate resources are available for social protection.

Egypt has implemented tough reforms under a $12 billion loan IMF programme agreed in late 2016 that involved deep

cuts to energy subsidies, new taxes, and a floated currency in a bid to draw back investors. Fuel prices were hiked with as much as 50 per cent and electricity rates increased by about 25 per cent, measures that made it harder for ordinary Egyptians to make ends meet, with another fuel price rise scheduled for next year. Additionally, consumer prices soared as the authorities floated Egypt’s currency and adopted a value-added tax (VAT).

In June 2018, the Executive Board of the IMF completed the third review of the economic reform programme supported by an arrangement under the extended fund facility (EFF). The completion of the review allowed the authorities to draw $2.02 billion, bringing total the to $8.06 billion of the $12 billion loan.

The Fund urged Egypt to maintain a tight monetary policy as a new round of subsidy cuts rekindled inflation worries, saying Egypt was beginning to reap the benefits of the reforms and estimates the economy will grow 5.2 per cent this year.

The Egyptian government is moving forward with structural reforms to modernise the economy and tap the potential of the country’s growing population. This includes steps to support exports and reduce non-tariff barriers, streamline as well as enhance industrial land allocation process and support SMEs, and strengthen public procurement.

Moreover, the Government is improving the transparency and accountability of parastatals as well as eradicating corruption, reforms which are vital to lure private investment which is essential to raise growth and make it more inclusive.

The authorities’ reform programme has

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MARKETS

helped accelerate growth, reduce inflation and unemployment as well as narrow external and fiscal deficits.

Egypt’s commitment to economic reforms has also charmed lenders, among them African Development Bank (AFDB) and China Development Bank. AFDB is currently taking all needed procedures to disburse the third and last tranche of its $1.5 billion loan to Egypt. The AFDB and the Egyptian authorities are discussing prospects of cooperation in supporting the private sector and infrastructure in Sinai, a move that contributes to luring investors.

The AFDB mission voiced the bank’s readiness to offer the support needed to help push forward the economic and social development in Egypt.

SOVEREIGN WEALTH FUND As part of structural reforms, the Egyptian government plans to launch its first sovereign wealth fund by the end of the year and will begin a roadshow in Q1 2019 to support private investment.

Modelled after sovereign wealth funds in Saudi Arabia, Kuwait, Oman and the UAE, Egypt’s new investment arm will seek to generate additional wealth from under-utilised state assets. Partnering with the private sector, the Egyptian fund will seek to attract domestic and foreign investment as well as build on economic reforms started in 2016 with the flotation of the currency.

The EGP 200 billion Egyptian Fund, is the latest government measure aimed at reviving growth and investment that faltered in the wake of the 2011 uprising.

The sovereign wealth fund will start with paid-in capital of EGP 5 billion, 20 per cent of which will be injected by the Government when it is set up.

The economic revival vehicle will partner with the private sector to invest in a wide range of assets, including land and buildings, as well as stakes in stateowned companies at market value. While the Government will wholly own the Egypt Fund, the private sector will be allowed to

buy stakes of over 50 per cent in sub-funds and affiliated companies. Also, the fund will be able to invest in various financial instruments, stocks, bonds as well as other securities inside and outside Egypt.

MAJORITY STAKE OFFERINGS IN PARASTATALS Egypt also plans to raise up to EGP 100 billion ($5.7 billion) by selling minority stakes in at least 20 state-owned enterprises on the stock market. The country’s public sector has long been criticised as bloated and inefficient, officials have struggled to push the firms toward profitability.

The current programme marks a first step

able to take a majority holding in the firm and the Government will retain a roughly 40 per cent share in the property developer.

There has been a lot of activity on the Egyptian Exchange (EGX) in the last three months. Cairo for Investment and Real Estate Development (CIRA) announced its intention to offer up 37.8 per cent of the company’s outstanding share capital, representing 207 million ordinary shares currently owned by Social Impact Capital.

Additionally, Sarwa Capital announced that it was offering 40 per cent of its capital in October, to collect about $120 million through increasing capital and partial exit of the main shareholder.

EGYPT’S ECONOMIC REFORMS WILL HELP ACHIEVE MORE SUSTAINABLE, INCLUSIVE AND PRIVATE-SECTOR LED GROWTH WHICH WILL HELP CREATE JOBS FOR YOUTHS WHILE ENSURING ADEQUATE RESOURCES ARE AVAILABLE FOR SOCIAL PROTECTION. – Christine Lagarde, Managing Director, IMF

toward attempting to strike a balance between efficiency, profitability and raising revenue for the Government.

This year, the Government will offer minority stakes in Alexandria Mineral Oils Company, Eastern Tobacco, Alexandria Container as well as Cargo Handling, Abu Qir Fertilisers and Heliopolis Housing.

The Egyptian ministry of finance said that the initial public offering (IPO) is focused in areas such as petroleum services, chemicals, shipping as well as maritime and real estate to help boost state finances.

The second portion of the 23 companies is expected to go on offer in Q1 2019, although officials have yet to decide on which firms or the sizes of stakes to be sold.

In July, Egypt offered investors the chance to take a majority stake in stateheld Heliopolis Housing. Additional stakes in five other companies will be sold by the end of the year. But investors will only be

CITIZENSHIP BY INVESTMENT The Egyptian government is leaving no stone unturned boosting its finances and draw back foreign. The lawmakers recently passed the Citizenship by Investment law allowing the offering of citizenship to foreigners who deposit at least EGP 7 million ($392,000) in foreign currency, then hand it over to the treasury after five years.

It is not immediately clear what economic benefits a foreigner would obtain by acquiring citizenship as Egypt places few restrictions on foreign investment projects, although it does forbid foreign ownership of agricultural land and property in the Sinai Peninsula. However, the parliament’s defence and national security committee stated foreigners who acquire citizenship would enjoy no political rights until after five years of citizenship and would need 10 years to be eligible for election or appointment to a representative body.

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COVER INTERVIEW

Mohamed Berro

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PROMOTING GROWTH Banker Africa sat down for an exclusive interview with Mohamed Berro, Chief Executive Officer, Emirates NBD Egypt to discuss where the bank is heading in the future and the current state of affairs in the Egyptian economy

S

ince joining ENBD Egypt earlier this year what have your key objectives been and how have you achieved them?

I joined the Group in Dubai for a few weeks before I moved to Egypt five months ago so that I could understand the divisions of the overall Group and the objectives for our presence in Egypt.

In the first few months I spent my time understanding the local market, economy and its dynamics. This is especially pertinent due to the many events that have happened in Egypt over the last few years, so I felt it was important to really take time to understand the market.

Internally my priority was on staff engagement and understanding the

culture of the bank and the dynamics of its staff. We’ve done a lot of work on this and I’m happy to say that I’ve been able to meet very nearly 50 per cent of the bank’s staff face-to-face and hear from them about their experience in the bank.

This has aided in my understanding of the bank and has helped foster a culture of direct feedback with our staff in regards to our strategy and where we want to take the bank moving forward. This was all of course in addition to understanding the financials and the balance sheet. It has been a very insightful first five months and I think it has been a good platform from which to really look at the direction we want to move in concert with the Group over the next few years.

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Meeting almost 50 per cent of the bank’s staff is quite an achievement in its own right. Does that feed into your management style?

I think so indeed. I believe that the main differentiator, especially in the banking sector—an industry where everything has been commoditised now, are the people and their engagement and their passion towards the bank. That’s the core of my management style—to be inclusive and engage staff in what we do and create the passion in their behaviour, productivity and work. I think is the main differentiator.

Everything else can become equally between the banks so supporting the staff is a major part of my management style.

You mentioned developments in Egypt, I suppose it’s putting lightly to say that in recent years there has been economic tension, changes and reforms. What is your outlook moving forward for the economy and the bank?

I’m very optimistic of the Egyptian economy. Prior to joining the bank and when I first joined I was reading about the various activities and measures that the Government has undertaken. However, reading is significantly different than understanding and living it and I have to say that I am very impressed actually with what the Government has done in its comprehensive and aligned effort to transform Egypt. We are lucky to be in Egypt; the country is now embarking upon a full scale transformation with economic measures across the board.

There have been various Central Bank initiatives aimed at tackling big issues such as financial inclusion, supporting the SME landscape and improving the regulatory environment, such as the new investment law and bankruptcy law. In addition, there has also been a big push on communication infrastructure, roads and what most impresses me is that the country is currently witnessing a full-scale transformation of its education system.

The headquarters of the Group in Dubai, UAE (CREDIT: PHILIP LANGE/SHUTTERSTOCK).

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THE AUTHORITIES HAVE REALISED THAT THE FUTURE REQUIRES A NEW SET OF SKILLS AND A NEW BREED OF PEOPLE. THE GOVERNMENT IS VERY MUCH ALIGNED WITH THIS TRANSITION AND THIS IS ONE OF THE FEW TIMES THAT I HAVE WITNESSED A COMPREHENSIVE ALIGNED SET OF MEASURES THAT AN ECONOMY OR COUNTRY HAS IMPLEMENTED IN LINE WITH THESE SHIFTING PATTERNS. –Mohamed Berro, Chief Executive Officer, Emirates NBD Egypt

The authorities have realised that the future requires a new set of skills and a new breed of people. The Government is very much aligned with this transition and this is one of the few times that I have witnessed a comprehensive aligned set of measures that an economy or country has implemented in line with these shifting patterns. This is what makes me very optimistic because it’s not only one dimension and set of efforts, its actually across the board—the society, the educational system, the economy and regulation. This will transform Egypt and put pressure on us banks to transform ourselves in order to align ourselves with the changes that are happening.

I’m a strong believer that the young population of Egypt, and the wider region, has changed the environment and really created a new breed of people, a new breed of customers that will not accept our traditional way of providing banking services. Unless banks can grow with these new customers as well they won’t be able to compete in the future—and actually not even in the long-term but also the short and medium. From our perspective we believe that Emirates NBD is uniquely positioned to take advantage of that: one because of the major transformation that Egypt is witnessing and two because the Group as Emirates NBD is a very advanced and competitive bank that can be leveraged into our Egyptian operations giving us a major competitive edge over our competition in the Egyptian market.

This will give us the opportunity to have an impact on the banking sector in Egypt and improve the overall banking environment.

You mentioned the Central Bank’s push for financial inclusion and for education and financial literacy, how are Emirates NDB Egypt supporting these movements, how are you increasing financial inclusion?

First of all, one of our major initiatives for financial inclusion is our digital service— our mobile bank and our digital banking.

We’re not quite there yet, but we have

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one of the most competitive digital offerings in Egypt. However, if you look at our presence and operation in the UAE we have introduced last year one of the most advanced digital banks ever called Liv. The platform is currently one year old in the UAE and has since acquired 120,000 customers.

Would it be fair to say then that the bank’s financial inclusion strategy is really driven by technology?

That’s definitely one element of it, but in addition we will be able to import the experiences and lessons learned from the UAE to Egypt sometime in the future. In addition, we already have a mobile wallet with the second largest mobile operator here in Egypt, Orange.

This platform currently has around three million subscribers. This in combination with our future potential implementation of Liv. in Egypt will give us one dimension for financial inclusion. You also need to add to that our good youth offering that has existed in the bank before but will be further developed to include the youth in the banking and financial sector. We also have some tactical activities that work within financial inclusion, such as our partnership with FC Barcelona.

Football is a major sport and is incredibly popular in Egypt thus promoting the use of banking products.

I’M A STRONG BELIEVER THAT THE YOUNG POPULATION OF EGYPT, AND THE WIDER REGION, HAS CHANGED THE ENVIRONMENT AND REALLY CREATED A NEW BREED OF PEOPLE, A NEW BREED OF CUSTOMERS THAT WILL NOT ACCEPT OUR TRADITIONAL WAY OF PROVIDING BANKING SERVICES. –Mohamed Berro, Chief Executive Officer, Emirates NBD Egypt

Can you talk to me a little bit about the bank’s current savings campaign—what is the intention of the campaign, and have there been any successes with the platform?

As a responsible bank we wanted to encourage savings and the major objective of the campaign has been to encourage people to save. Not only do we have a good savings offering but we have added additional incentives.

For every new deposit over a certain threshold there is the opportunity to win a grand prize of EGP 5 million. We also have a weekly prize worth EGP 50,000

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and a monthly prize of EGP 100,000.

The campaign will run for seven months and so far, the campaign has exceeded expectations. Customers like our offering as a bank and as a product and as a campaign which is why we believe it has been so successful. We have even reduced the threshold for deposits to enter the prize pool to EGP 30,000.

This further proves that the campaign objective is to encourage savings and encourage financial inclusion.

We’ve spoken a lot about the opportunities and positivity for Egypt and Emirates NBD Egypt. Can we touch on some of the challenges that are facing the bank and how you are going to seek to address them?

There are some internal challenges and external challenges. Let’s start with the external ones. I think the external ones that we are facing are the same across most of the banking sector. This includes the speed at which the regulatory framework adapts and regulation changes. Changing a full regulatory environment takes more time and I see that, so this is one of the challenges we have although it is not a major one.

I think the whole transformation that Egypt is going through as I mentioned earlier is a major opportunity for us to grow, although yes there is a challenge with the changes and the slowness or obstacles that could happen along the journey. Internally I think the challenge is to strengthen the engagement of our employees and to realign ourselves with the segments that we want to serve and be best at in combination with leveraging the Group’s overall success.

Another challenge we are facing that is both internal and external and is that of the growth of the SME business. This is also being headed by the regulator and I think that it is an important element in the success of their transformation plans. As such we are approaching the SME market is a different way. I think traditionally

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the banking and finance industry have approached SMEs from one natural dimension, which is providing products and services from a financial perspective.

However, I think for a successful SME growth journey you need three pillars. One is the financing element which most banks and ourselves already provide, but there are two further elements that are crucial to success. The first is guidance, advice and training for the SMEs. These businesses often require some training, business advice and guidance, which is something we are trying to address now internally along with the support of various potential entities, whether they be the regulator, Government or an international body. We haven’t reached there yet but that I think that this is critical for us to be successful in the SME market and differentiate ourselves, as well as impact the progress and growth of the SME business in the country.

The final element that is also important for SME growth in the economy is working with those SMEs on improving their financial disclosures. This is an important element that is a win-win for everyone, it’s a win for the banks, it’s a win for the smaller companies, the SMEs, and also a win for the Government as well. As such we are looking at ways of working with those SMEs to improve their financial disclosures, again also with some external bodies such as other accounting firms, regulators and the Government. Overall, we are trying to approach SMEs from a holistic perspective, rather than only just finance products.

BANKS ARE ONLY FOCUSED ON FINANCING THE SME BUT FORGET THAT ONE OF THE MITIGATING FACTORS OF RISK IS EDUCATION, GUIDANCE AND ADVICE FOR AN SME, ALONG WITH HELPING AN SME IMPROVE TRANSPARENCY VIA THEIR FINANCIAL DISCLOSURES. –Mohamed Berro, Chief Executive Officer, Emirates NBD Egypt

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THE NEW BREED OF PEOPLE THAT ARE GROWING AND BECOMING THE CUSTOMERS OF THE FUTURE ARE CHANGING, THE COUNTRY IS LARGE, THE ECONOMY IS GROWING SO THERE ARE A LOT OF NEW CUSTOMERS THAT ARE COMING INTO THE MARKET AND WE HAVE TO BE READY FOR THAT AND WE HAVE TO BE READY FOR THEIR CHANGING NEEDS. –Mohamed Berro, Chief Executive Officer, Emirates NBD Egypt

In general the SME business has often been associated as the riskier side of banking for the institution in question.

Indeed, and this is why the two other pillars that I mentioned are ways to mitigate those risks. Banks are only focused on financing the SME but forget that one of the mitigating factors of risk is education, guidance and advice for an SME, along with helping an SME improve transparency via their financial disclosures. I think if we take a holistic approach not only will we help them grow but we also minimise and mitigate the risk that exist when normally operating in the SME market.

What are we going to see from Emirates NBD Egypt moving forward for the rest of this year?

I don’t think we will be necessarily launching new products or campaigns, I think the remainder of the year we will are going to be focused on finalising our strategy on which we will plan next year and the next step in our growth story. I don’t want to fully disclose our strategy yet but what I can say is that we will be refining our approach to be very focused and to be the best in the segment that we serve. We want to be known as the best in certain segments in the country and I think this will be the added value to the strategy that we are building, in addition to adding value to the bank and banking sector as a whole.

One more element in our strategy that I can disclose that is also unique for us is our ability to leverage the geography of the Group.

We are a bank in Egypt that has a bank in Saudi Arabia and bank in the UAE, so if you look at the local market there is no bank, no international bank, that is in Egypt that has these three geographies.

There are three million Egyptians working between Saudi Arabia and the UAE, so one of our focuses will be on leveraging and creating an offer for individuals and to become the bank of non-resident Egyptians in the UAE and in Saudi Arabia. Banks have had tremendous success in the UAE targeting the nonresident Indian market, so we want to play that same approach but for the nonresident Egyptians between the UAE and Saudi Arabia.

There are so many dynamics that are changing in the country—an economy that is recovering, a country that is transforming and a customer base that is changing. From that perspective we are finding our niche and our segment and how we can be the best in each of them and this is what you will see next year. The new breed of people that are growing and becoming the customers of the future are changing, the country is large, the economy is growing so there are a lot of new customers that are coming into the market and we have to be ready for that and we have to be ready for their changing needs. Why am I so confident that we can do that? It is because of the external factors that I have mentioned, the unique internal engagement that we have fostered, our focus, and importantly being part of a Group that is very successful from which we can leverage further success.

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(CREDIT: PATRICE6000/SHUTTERSTOCK)

COUNTRY FOCUS

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REFORMS REQUIRED Tanzania is in need of reform to continue is impressive historical growth curve

T

anzania has traditionally been one of the true growth stories on the African continent. Real GDP growth between 2013 and 2016 averaged a least seven per cent. However, since the last quarter of 2016 growth as slowed moderately with a full year growth expectation of 6.5 per cent for 2017 according to the African Economic Outlook 2018. Throughout 2018 and 2019 we are likely to see a recovery in this figure, although not quite to historic highs, with estimates placing GDP growth at around 6.7 per cent.

In Banker Africa #44 we argued that growth was likely to recover throughout 2017. This prediction overall came to fruition as despite the slow economic growth of 5.7 per cent for Q1 2017 growth throughout Q2 in transportation services, construction and agriculture to 7.8 per cent offset the shaky start to the year.

Regionally, the country continues to be one of the best performers.

Mauricio Villafuerte, who led an IMF staff visit in late 2017 said, “Preliminary data for the first half

TANZANIA’S ECONOMIC REFORM PROGRAM IS ON COURSE AND THE COUNTRY IS COMMITTED TO STRENGTHENING COMPETITIVENESS AND DEVELOPMENT OF THE PRIVATE SECTOR. – Soraya Mellali, Executive Director, African Development Bank

of 2017 released by the authorities indicate that the economy grew at a still strong 6.8 per cent. A good harvest should help support growth, but other macroeconomic indicators—lower-thananticipated government spending and tax revenue collections, weak private sector credit growth and rising non-performing loans—suggest that there are downward pressures on growth.”

The Government and Central Bank have taken measures to expand the liquidity environment, and credit in the

private sector accelerated notably in Q2 of 2018, according to FocusEconomics in its October 2018 Consensus Forecast SubSaharan Africa. However, the banking sector continues to be weighed upon by a significant stock of non-performing loans (NPLs).

Development spending has grown considerably in annual terms yearon-year due to an increase in public spending, although this figure has outpaced growth in tax revenues. The African Economic Outlook 2018 noted that public investment, particularly in infrastructure projects, is expected to support growth in the near-future.

However, Government expenditure was 20.7 per cent below its target, although this figure was 8.4 per cent higher than the previous fiscal year. This was partially due to lower than expected revenues in 2016 and 2017, leading to a higher fiscal deficit than otherwise expected—3.7 per cent of GDP in 2016 and 2.1 per cent in 2017. The African Economic Outlook 2018 notes that although the level of public debt is sustainable, debt service costs have increased considerably

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Dar es Salaam is the centre for Tanzania’s finance industry (CREDIT: EXPLORER/SHUTTERSTOCK).

in recent years, leading to a potential reduction in fiscal space.

The IMF noted falling tax revenue collections in early 2018 during the country’s seventh Policy Support Instrument (PSI) review. The PSI is an instrument of the IMF designed for countries that do not need balance of payments financial support.

The PSI helps countries design effective economic programs that, once approved by the IMF’s Executive Board, signal to donors, multilateral development banks, and markets the Fund’s endorsement of a member’s policies.

In this report the IMF stated that, “Although GDP data point to continued strong growth, other high frequency data suggest a weakening of economic activity.

Tax revenue collections are lower than expected and credit growth has stagnated reflecting in part banks’ rising NPLs.

A GOOD HARVEST SHOULD HELP SUPPORT GROWTH, BUT OTHER MACROECONOMIC INDICATORS—LOWER-THANANTICIPATED GOVERNMENT SPENDING AND TAX REVENUE COLLECTIONS, WEAK PRIVATE SECTOR CREDIT GROWTH AND RISING NON-PERFORMING LOANS—SUGGEST THAT THERE ARE DOWNWARD PRESSURES ON GROWTH.

Inflation remains moderate, and international reserves have increased substantially. There are downside risks to economic growth in the short term stemming from slow budget implementation, a challenging business environment, and private sector concerns about authorities’ enforcement of rules.”

In its review the IMF noted that performance under the PSI had been broadly satisfactory but that macroeconomic policies will need to be closely coordinated. Increased public infrastructure spending will, however, help support the construction sector with overall growth fuelled by the authority’s expansionary monetary policy stance.

– Mauricio Villafuerte, IMF BANKING RESILIENCE Moody’s Investors Service said in its report released earlier this year entitled Banking System Brief: Tanzania that

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TANZANIA

by the numbers GDP GROWTH

POPULATION

COMPETITIVENESS

10 8

51

Ranked 113

6 4

million

0

Source: IMF World Economic Outlook Database (July 2018)— estimated

overall

2

% % 6.60 5.4 Projected in 2018 Projected in 2019

Source: IMF World Economic Outlook Database (July 2018)— estimated

LONG-TERM TRENDS I 3-year averages 2014-16

2017-19

2020-22

Population (million)

47.7

51.1

54.2

GDP (USD bn)

46.5

56.3

71.2

976

1,102

1,313

7.0

6.7

6.3

Fiscal Balance (% of GDP)

-2.8

-3.3

-3.5

Public Debt (% of GDP):

36.3

41.3

43.7

5.6

5.0

5.3

Current Account (% of GDP):

-7.6

-4.4

-5.0

External Debt (% of GDP):

33.9

35.7

36.4

GDP per capita (USD) GDP growth (%)

Inflation (%):

for institutions

out of 137 Source: Global Competitiveness Report 2017-2018/World Economic Forum

ECONOMIC STRUCTURE GDP by Sector I share in % 100

2008-10 2011-13

2014-16

80 60 40 20 0

GDP by Expenditure I share in % 120

Agriculture

2008-10 2011-13

2014-16 Net Exports

90

Manufacturing

60

Investment

Other Industry

30

Government Comsumption

Services

0

Private Consumption

-30

Source: FocusEconomics Consensus Forecast Sub-Saharan Africa – October 2018

Source: FocusEconomics Consensus Forecast Sub-Saharan Africa – October 2018

TRADE STRUCTURE

EASE OF PAYING TAXES

Primary markets I share in %

Ranked 154 out of 189

EXPORTS

EU-28 9.3% Other Asia ex-Japan 8.5% India 21.1% MENA 5.8%

Ranked 70

South Africa 16.1% Kenya 13.6% Zambia 7.9% Other 17.7%

IMPORTS

EU-28 11.0% Other Asia ex-Japan 9.0% China 17.9% India 16.6%

Source: FocusEconomics Consensus Forecast Sub-Saharan Africa – October 2018

Other MENA 7.5% United Arab Emirates 7.4% South Africa 5.6% Other 24.9%

44.1% total tax rate

Source: PwC Paying Taxes 2018 analysis

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overall the country’s banking system will remain resilient with improving operating conditions, solid capital and liquidity, despite asset quality and profitability pressure.

OUR NUMBERS

Banker Africa’s analysis of the top banks in Tanzania has revealed some interesting results. In this chart we rank the ‘Best Banks’ in Tanzania. The ranking is based upon a methodology which weights eight key financial metrics in order to provide a comprehensive view of the country’s ‘Best Bank’.

BEST BANKS NAME

RANK

National Microfinance Bank (NMB Bank PLC)

1

CRDB Bank Plc

2

Yetu Microfinance Bank

3

Bank of India Tanzania

4

DCB Commercial Bank

5

Habib African bank Limited

6

I & M Bank Tanzania

7

NBC Limited

8

EXIM Bank Tanzania

9

Mkombozi Commercial Bank Plc

10

Source: Banker Africa

Similarly, to the above chart we have also ranked Tanzanian financial institutions in terms of fastest growth through four weighted financial metrics.

FASTEST GROWING BANKS NAME

RANK

Yetu Microfinance Bank

1

Mkombozi Commercial Bank Plc

2

Mwalimu Commerdial Bank

3

Amana Bank Limited

4

NBC Limited

5

Bank of India Tanzania

6

I & M Bank Tanzania

7

Habib African bank Limited

8

National Microfinance Bank (NMB Bank PLC)

9

CRDB Bank Plc

10

Source: Banker Africa

Inflation of the Tanzanian shilling has remained moderate, whilst international reserves have increased significantly (CREDIT: PEARL-DIVER/SHUTTERSTOCK).

“We expect operating conditions to gradually improve as private sector businesses adapt to higher taxes and liquidity in the system improves with the payment of Government arrears and more focus on infrastructure and development plans by the authorities,” said Christos Theofilou, a Moody’s Assistant Vice President—Analyst and author of the report.

The operating conditions for banks in the East African country have been historically challenging, says Moody’s, with activities hampered by several

measures including higher tax payments and delayed tax refunds weighting on private sector companies.

“Tanzanian banks’ capital buffers will remain among the strongest in Sub Saharan Africa and globally, due to the banks’ strong earnings generation,” added Theofilou. “Although Tanzanian banks’ profitability has declined due to lower interest income, reduced business activity and rising loan-loss provisions, it remains strong by global standards with a return on assets of two per cent during the first nine months of 2017.”

34 page 30-36 Country Focus 055.indd 34

23/10/2018 12:10

Moody’s adds that the country can expect to see broadly stable liquidity metrics due to the muted loan growth of around five per cent and growing financial inclusion, and stable Government and private sector deposits.

NPLs will continue to be a problem for Tanzanian banks and has indeed grown. At the end of 2014 NPLs stood at 6.8 per cent of total loans, whilst by September 2017 this figure had grown to 12.6 per cent. While improving operating conditions mean that banks’ NPLs are close to their peak, NPLs may rise further in the first half of 2018 due to the continued, delayed impact from last year’s public sector job cuts, a corporate liquidity crunch and lower corporate margins following a crackdown on tax collection,” Moody’s concluded.

In March of 2018 the agency assigned a first-time B1 issuer rating to the Government of Tanzania with a negative outlook.

TANZANIAN BANKS’ CAPITAL BUFFERS WILL REMAIN AMONG THE STRONGEST IN SUB SAHARAN AFRICA AND GLOBALLY, DUE TO THE BANKS’ STRONG EARNINGS GENERATION. – Christos Theofilou, Assistant Vice President—Analyst, Moody’s

The ratings agency noted that the country’s very low institutional strength which is constrained by Governance challenges.

Indeed, according to the 2016 Worldwide Governance Indicators (WGI) Tanzania falls in the bottom third of sovereigns rated by the agency on scores for rule of law, government effectiveness and control of corruption—although the country is ahead of the Sub Saharan Africa median.

The agency stated that the negative outlook is a reflection of the overall balance of risks to Tanzania’s credit profile marred by an unpredictably policy environment which has constrained the business climate.

The World Bank’s tenth edition o f i t s Ta n z a n i a E c o n o m i c U p d a t e broadly supported this hypothesis.

The report noted that the two most important challenges for the country’s economy were that of the under-execution of the national budget and the decline in private sector sentiment.

Overall for the country to continue to maintain its success story close coordination by the authorities of macroeconomic policies will be required.

Tanzania’s economic reform programme receives African Development Bank’s support Tanzania’s ongoing macroeconomic reform programme has received a boost from the African Development Bank through a $40 - million budget support loan to be provided by the African Development Fund, the concessional arm of the Bank Group.

The budget support facility is being managed under the Bank’s Good Governance and Private Sector Development Program (GGPSDP). The first phase of the GGPSDP reinforces Tanzania’s Blueprint for Regulatory Reforms to Improve the Business Environment and forms part of the $80 million two-year programmatic budget support for the East African nation, covering the fiscal year 2017/18 and 2018/19.

Specifically, the programme promotes the country’s transition towards inclusive and resilient private sector-led economic growth agenda, backed by improved economic and financial governance. In approving this budget support loan, the Board of Directors of the Bank appraised Tanzania’s economic management and considered ongoing efforts to achieve public sector budget credibility, macroeconomic stability, a conducive climate for private sector development and an effective procurement systems and audit services.

The Bank’s intervention will enhance the viability of Private, Public-Sector Partnerships (PPPs) and support improvements in the institutional, legal and regulatory framework for business operations in Tanzania. It will also build on prior Bank operations in the country, notably the Governance and Economic Competitiveness Support Program, Power Sector Reforms and Governance Support Program implemented during 2015-2017. The programme complements the Bank’s Institutional Support Projects for Good Governance and the Domestic Resources Mobilization and Natural Resources Governance Project.

Commenting on Tanzania’s ongoing economic reforms, Soraya Mellali, Executive Director for Algeria, Guinea and Madagascar at the Bank said that, “Tanzania’s economic reform programme is on course and the country is committed to strengthening competitiveness and development of the private sector. The budget support loan would further aid this process.”

The funding is aligned to pillar II of the Bank’s Tanzania Country Strategy Paper, Strengthening Governance and Accountability, and two of the five operational priorities of the Bank Group’s Ten-Year Strategy (Private Sector Development, and Governance and Accountability). It also supports the core priorities of the Bank’s Governance Strategic Framework and Action Plan, and the Private Sector Development Strategy for Tanzania.

bankerafrica.net

page 30-36 Country Focus 055.indd 35

35

23/10/2018 12:10

COUNTRY FOCUS

Chart 1 - MOVEMENT OF NATIONAL CONSUMER PRICE INDICES (NCP) AND INFLATION RATES FROM AUGUST, 2017 – AUGUST, 2018. (DEC., 2015=100)

113.24

112.70

110

108.94

108.48

112.81

111.33

17

112.44 112.01

13

108.21

108.41

108.46

113.20

108.13

105 9

100 95

5.3

5.0

5.1

Inflation Rate

115

CPI

5 4.4

4.0

4.1

4.0

3.9

3.8

3.6

3.4

3.3

3.3

90

8 -1

8

Au g

l-1

8

18

Ju

nJu

r-1

8

M

ay -1

18

CPI

Ap

ar-

8 M

-1 Fe b

18 nJa

c-1

7

7

De

7

No v-1

17

t-1 Oc

pSe

-1

7

1

Au g

Ta n z a n i a i s f a c e d w i t h a l a r g e underemployed young population with high levels of poverty, meaning that strong growth and job creation are both required. Private-sector sentiment will need to be addressed to improve the business climate with sustained reforms. Private sector-led growth is always a much more sustainable model than that of continued government expenditure—although issues of infrastructure will still need to be addressed. By following through with these polices the Government will be able to establish further credibility and belief that it can follow through with its ambitious development plan. Furthermore, reforms in tax policy and administration are necessary to revive revenue growth. For the financial sector, addressing the high level of NPLs is the key concern to secure any vulnerabilities and help revive credit growth.

Infaltion Rates

Source: Tanzania National Bureau of Statistics

Figure 2: TANZANIA'S GROWTH CONTINUES TO OUTPACE EAC PEERS

GDP I VARIATION IN % (a) Annual GDP growth

10

9.5% 8.5% 7.5%

5

6.5% 5.5% 4.5%

0

3.5%

Tanzania SSA World -5 2000

2005

2.5% 2014 2010

2015

2015

Kenya

2020

Real GDP growth

Real GDP per capita growth

8 6

CPI inflation

8

8

2 2017

2018

Rwanda

4

4

2

2

Budget balance (% of GDP)

4

2016

Uganda

Source: World Bank Tanzania Economic Update/Tanzania National Bureau of Statistics

Source: FocusEconomics

0

Tanzania

2016

2019

0

2016

2017

2018

2019

0

2016

2017

2018

2019

Current account (% of GDP)

0

0

-2

-2

-4

-4

-6

-6

-8

2016

2017

2018

2019

-8

2016

2017

2018

2019

Source: Data from domestic authorities/African Economic Outlook (AEO); figures for 2017 are estimates; 2018 and 2019 based on AEO calculations.

36 page 30-36 Country Focus 055.indd 36

23/10/2018 12:10

CONNECTING LEADERS

The ALN Africa Investment Conference has been held annually since 2014 with the objective of spurring investment into Africa, connecting industry and policy leaders and promoting the continent.

REASON TO ATTEND: The Africa Investment Conference offers you a wealth of interactive sessions led by business leaders and decision makers with a deep understanding of Africa’s dynamic business environment.

The conference will cover topics including:

GUESTS OF HONOUR

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SPONSORS

•

Risks and rewards of opening Africa up for business.

•

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•

Implications of the adoption of disruptive technology.

•

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•

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•

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MEDIA PARTNER

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CPI Ad.indd 1

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20/08/2018 18:56

03/09/2018 16:16

ISLAMIC FINANCE

AFRICAN SUKUK ON THE RISE The prospects for Islamic finance across the African continent are substantial, says Moody’s

I

n a recent report entitled Promising growth prospects for Islamic finance in 18 African countries, Moody’s Investors Service explored the expansion of Islamic finance across the continent. Since the start of 2014 there has been some $2.3 billion of African Sukuk (Islamic, Shari’ah-compliant bonds) issuance providing a new funding source for sovereigns and financial institutions.

Despite this growth, however, African Sukuk still only represents a very small percentage of global Sukuk issuance, at 0.5 per cent. Moody’s add in their report

that the organisation expects the growth of both Sukuk issuance and Islamic banking assets to grow quickly in Africa from its current low base.

Banker Africa spoke exclusively with Akin Majekodunmi, Vice-President, Senior Credit Officer at Moody’s Financial Institutions Group in regards to the report and Moody’s findings: What has been the driving force behind the growth of Islamic finance on the continent?

We expect growth in Sukuk issuance to

38 page 38-39 Islamic Finance 055.indd 38

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be driven by increasing financing needs (especially for infrastructure projects); global investors’ growing comfort with the relatively complex legal structure of Islamic instruments; and the desire within Africa for stronger investment links with fast-growing economies in the Gulf and Asia that have large Muslim populations with large pools of available capital.

For Islamic banks, efforts by African governments to support Islamic banking in line with the cultural and religious affinity of their populations will support growth in this sector.

Which specific geographic and regional areas are prime for Islamic banking products?

We identified 18 African countries as having the greatest growth potential for Sukuk issuance and/or Islamic banking.

These were: Egypt, Morocco, Algeria, Tunisia, Senegal, Nigeria, Niger, Mali, Gambia, Mauritania, Guinea, Togo, Ivory Coast, Sudan, Kenya, Djibouti, Somalia, South Africa.

Much of the Muslim population of Africa remains unbanked. Do you see financial inclusion as playing a key role in the growth of Islamic finance?

We see Islamic finance playing a part in financial inclusion. We expect Africa’s large Muslim population, which is predominantly unbanked or under-served, to provide a solid foundation in which Islamic banking assets can grow rapidly.

Which countries have succeeded in introducing a strong regulatory framework for Islamic banks and what lessons can be learnt from their experience?

Countries such as Nigeria, Senegal and Kenya have recently implemented banking, legal and regulatory frameworks to spur growth in the Islamic banking sector. As an example, Nigeria’s only Islamic bank, Jaiz Bank, has grown by 519 per cent by assets over the last five years, expanding its

ISLAMIC FINANCE PENETRATION IN AFRICA IS STILL IN ITS EARLY STAGES $ Billions BANKING ASSETS

SHARE %

Asia

REGION

232

14.9%

239.5

59.9%

GCC

683

43.9%

139.2

34.8%

MENA (ex. GCC)

569

36.5%

17.8

4.5%

Africa (ex. North)

27.1

1.7%

2.0

0.5%

Others

46.4

3.0%

1.5

0.4%

1557.5

100%

400

100%

Total

SUKUK OUTSTANDING

SHARE %

Source: Islamic Financial Services Board (Banking asset data as of June 2017, Sukuk data as of December 2017), Moody’s Investors Service

COUNTRIES WITH THE MOST POTENTIAL FOR ISLAMIC FINANCE GROWTH North Africa

West Africa

East Africa

LARGE MUSLIM POPULATION*

MULTIPLE/>3 ISLAMIC BANKS

Egypt (B3, stable)







Morocco (Ba1, positive)







Algeria (unrated)





Tunisia (B2, stable)





Senegal (Ba3, stable)





Nigeria (B2, stable)





Niger (unrated)





Mali (unrated)



 



Gambia (unrated)



Mauritania (unrated)





Guinea (unrated)





Togo (unrated)



Ivory Coast (Ba3, stable)



Sudan (unrated)



Kenya (B2, stable)

Southern Africa

SUKUK ISSUANCE**









Djibouti (unrated)





Somalia (unrated)





South Africa (Baa3, stable)



Source: Bureaus of statistics, Bloomberg, central bank data, Islamic Financial Services Board, Moody’s Investors Service

branch network from just three branches in 2013 to 33 now, and serving 230,000 customers across the country.

Islamic banking assets still represent a very small percentage of overall assets on the continent. How quickly are we likely to see this figure increasing and what are the constraints on this growth?

Islamic banking assets represent less than five per cent of total African banking assets currently, but we see this rising to above 10 per cent over the next five years.

WE EXPECT AFRICA’S LARGE MUSLIM POPULATION, WHICH IS PREDOMINANTLY UNBANKED OR UNDERSERVED, TO PROVIDE A SOLID FOUNDATION IN WHICH ISLAMIC BANKING ASSETS CAN GROW RAPIDLY. – Akin Majekodunmi, Vice-President, Senior Credit Officer, Moody’s Financial Institutions Group

bankerafrica.net

page 38-39 Islamic Finance 055.indd 39

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ISLAMIC FINANCE

UNLOCKING ISLAMIC FINANCE FOR INFRASTRUCTURE Dr Osman Babiker Ahmed, Lead Economist, IRTI-IDB Group, writes about the value that increasing the share of Islamic financing in infrastructure can produce

R

emarkable progress was made globally in translating the MDGs into reality with a huge reduction in the levels of life-threatening poverty over 2000-2015. Most regions of the world experienced poverty reduction during this period.

Nonetheless, poverty reduction was very slow in some regions such as Sub Saharan Africa and Asia. Income inequality has also very narrowly declined across countries but increased in many countries.

The progress on other MDGs in relation to education and health has not been fully seen. Worldwide environmental issues need serious attention alongside other development objectives.

Because of these reasons, the world, through the UN, adopted a new set of development objectives: the Sustainable Development Goals—SDGs. SDGs are a new round of global goals to follow the 15-year MDGs period.

The range of SDGs is more generic than the MDGs, focusing on economic and environmental sustainability issues including inclusive growth, industrialisation, job creation, and climate change. Besides, SDGs reframe development as a universal project and SDGs are comprehensive and indivisible with a great deal of interaction among them.

In reality, the implementation of SDGs needs a set of preconditions, including

financial resources, sovereign leadership commitment, partnership, effective institutions, good governance, physical infrastructure, human capital, technology, social inclusion and effective policies.

The infrastructure finance is estimated at around $3-4 trillion annually until 2030.

All development finance available does not exceed $300 billion—only 10 per cent of the need, according to the WB and IsDB Report 2017. The challenge is how to promote a financial system with the right institutions and governance that incentivises a redirection of some of this investment toward sustainable development. Therefore, both private and public financing from domestic and

40 page 40-42 Islamic infrastructure 055.indd 40

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Africa’s infrastructure gap could be financed in part by Islamic financing (CREDIT: IKPRO/SHUTTERSTOCK).

international sources are necessary, and both need to be effectively exploited.

The Addis Ababa Actionable Agenda calls for resource mobilisation, of public and private capital, at local and global levels. The UN states that innovative financing initiatives will be required at all levels, especially the private sector, to secure funding for the SDGs and achieve the global sustainable aspirations of societies.

Studies have revealed that access to finance has a strong correlation with poverty reduction, economic growth and development and overall social welfare.

Given that, how can Islamic finance help and contribute to achieve this ultimate goal of poverty reduction by providing funds for infrastructure projects?

Islamic finance has been accepted as a workable mechanism of dealing with poverty alleviation and augmenting i n cl u si ve e co nom i c d evel op m ent .

It encourages economic activities and entrepreneurship, ensures financial and social stability, and addresses financial inclusion and supports comprehensive human development, which are all relevant to sustainable development.

Islamic finance can also offer new ways of addressing both small and medium projects on one side, and mega infrastructure and public-private partnership (PPP) projects on the other side. The global need for infrastructure is huge. It extends across all regions, giving rise to a massive deficit in infrastructure investment. Given the global infrastructure financing deficit, $2.5 trillion annually, Islamic finance can mobilise resources for mega projects and equally for SME and micro enterprises. Different Islamic financial instruments can provide flexible tailored-funding for specific small-sized or mega projects. Examples of modes for financing are Sukuk, Ijarah, instalment sale, Istisnah and equity.

Many of the Organisation of Islamic Cooperation (OIC) member countries are on a drive to entice private capital to finance their infrastructure projects. Islamic finance can provide a complementary source of financing to these efforts.

In view of that, and to bring in more Islamic finance, the state of affairs must be set for infrastructure projects to attain a much larger share of total investment.

This can be done if the preparedness of developing countries for infrastructure projects can be upgraded, and additional sources of finance, such as Islamic finance, can be put in order for the infrastructure projects.

The evidence from a number of OIC member countries (Pakistan, Djibouti, Turkey, Saudi Arabia, Jordan, and Malaysia) illustrates the flexibility of Islamic finance in putting together Shari’ah-compliant solutions across different countries and sectors. These cases span power, airports, sea ports, health care, and roads. It should be noted that these countries vary greatly in terms of their (i) macroeconomic environments, (ii) readiness to support infrastructure projects, and (iii) institutional maturity vis-à-vis Islamic finance.

The asset-backed feature of Islamic finance modalities and their emphasis on shared risks make them naturally appropriate for infrastructure projects. A wide diversity of Islamic finance structures exists to provide sufficient flexibility to practitioners in selecting appropriate financing modalities.

The success of infrastructure projects in using Islamic finance has inspired project benefactors (equity investors) in countries such as Bangladesh, Djibouti, Indonesia, Kazakhstan, Malaysia, Mali, Morocco, Nigeria, Pakistan, Saudi Arabia, Turkey, and Uzbekistan to continue to pursue Islamic finance, along with conventional finance, in undertaking yet to come infrastructure projects.

The Islamic Development Bank Group (IsDBG) has been a pioneer in offering Islamic finance for infrastructure projects. In addition, other multilateral development banks and international financial institutions, including the IFC and MIGA of the World Bank, and the Asian Development Bank, have started positioning Islamic finance instruments

THE INFRASTRUCTURE FINANCE IS ESTIMATED AT AROUND $3-4 TRILLION ANNUALLY UNTIL 2030. ALL DEVELOPMENT FINANCE AVAILABLE DOES NOT EXCEED $300 BILLION—ONLY 10 PER CENT OF THE NEED, ACCORDING TO THE WB AND ISDB REPORT 2017.

bankerafrica.net

page 40-42 Islamic infrastructure 055.indd 41

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ISLAMIC FINANCE

to support infrastructure projects, thus providing much-needed assurance to fund providers. For each transaction that takes place, innovations in the structures used contribute to the body of knowledge and experience, and prepare the way for future dealings.

Ye t I s l a m i c f i n a n c i n g i s n o t consistently used in infrastructure projects. More knowledge about Islamic finance is required by countries seeking infrastructure finance and techniques to facilitate the practice of Islamic finance instruments in order to mobilise private investment in infrastructure projects.

Assuming that many stakeholders, including project promoters and commercial banks, have a rather modest

understanding of the application of Islamic finance to infrastructure projects, there is a substantial opportunity for awareness and knowledge building in this space.

In conclusion, and in terms of financing infrastructure projects, Islamic finance is among the workable alternatives to fund development based on SDGs. The two basic principles behind Islamic finance are the sharing of profit and loss and, significantly, the prohibition of the collection and payment of interest.

Theorists, practitioners and regulators recognise the ethical, multi-channel and diverse dimensions of Islamic finance, as well as its link to the real economy. In terms of the diversity of application, the

use of Islamic finance extends to a range of economic subsectors (international trade, housing, education and health, food and water security, infrastructure and energy, agriculture and rural communities). While each sector has its own peculiarities, Islamic finance has suitable ways to address them.

Moreover, tradable securities (Sukuk, shares, Waqf certificates, etc.) originate from these mechanisms. Islamic finance is possible and provided through a multitude of channels, including through public, private and voluntary sectors for a wide range of goods and services (food and water security, housing, energy and infrastructure, education and health, trade) to further economic development.

Islamic finance could offer new ways of approaching small and medium enterprises as well, said Ahmed (CREDIT: URBAN CINEMATOGRAPHY/SHUTTERSTOCK).

42 page 40-42 Islamic infrastructure 055.indd 42

23/10/2018 12:15

DETERMINED GROWTH Kenya’s positive outlook for 2018

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11/07/2018 15:23

ISLAMIC FINANCE

THE FUTURE OF GREEN SUKUK In a recent report, S&P looked at the prospects for green Sukuk

A

s an instrument green Sukuk is a relatively new phenomenon.

Malaysia’s Tadau Energy issued the world’s first green Sukuk in July 2017 and has been followed by a handful of others. These funds have raised investment largely in solar power generation projects.

In general, green Sukuk is an Islamic financial instrument which has tapped into the trend of social investing. Finance raised from green Sukuk typically supports investments in renewable energy or other environmental assets such as solar parks, biogas plants, wind energy projects, as well as renewable transmission and infrastructure projects, according to S&P. Malaysia, and Southeast Asia, have led the way so far for issuances, with Tadau Energy’s aforementioned $58 million Sukuk to finance a solar project within Malaysia being the first. The handful of other green Sukuk that have listed following this in line with the country’s Sustainable and Responsible Investment (SRI) Sukuk framework could represent a model for future green Sukuk listings across the African continent and worldwide.

S&P point to green Sukuk as a way for issues to access not only the pool of conventional investors interested in green projects but also Islamic investors. Indeed, many conventional investors have already rewritten their investment guidelines to incorporate a level of social responsibility.

In 2017 Thomson Reuters estimated the shortfall in supply Sukuk at some $143 billion. This should provide further support for issuers as they look to take advantage of the wider pool of investors and unmet demand in the Sukuk markets, leading to potential higher appetite, lower pricing and longer maturity.

On the investor side, S&P note that investors interested in green Sukuk primarily do so for two main reasons.

The first of these is that of the Islamic investor looking to find an investment which is compliant with Shari’ah law— at its simplest Islamic investors and institutions simply cannot invest in conventional products.

Conventional investors, on the other hand, might be committed to a green Sukuk fund in order to meet their own investment guidelines and objectives.

Due to the nature of this form of social

impact investing, investors may further enjoy the additional transparency that green Sukuk provides, because the Sukuk’s underlying assets must be identified from the outset, S&P added.

Growth in green Sukuk is likely to grow in tandem with the greater demand for green energy and green energy products.

This trend can already be seen growing across the African continent, and green Sukuk could provide a way for Islamic investors to support the market in ways that conventional investment products do not normally allow. Renewable energy growth requires considerable investment so the need for green Sukuk is not likely to change in the near-term.

However, growth in Sukuk issuance would greatly benefit from regulatory support. Governments could pull levers to support the market. In addition, a greater standardisation of legal documentation and Shari’ah interpretation would benefit the green Sukuk market, although these are issues that tend to constrain the Islamic finance sector in general.

S&P Global Ratings rated the green Sukuk issued by Indonesia in early 2018.

The agency said as to its rating that,

44 page 44-45 Islamic infrastructure 055.indd 44

23/10/2018 12:19

GREEN SUKUK ISSUANCES TO DATE Issuer

Country

Issue date Currency

$

Use of funds

Tadau Energy Sdn Bhd

Malaysia

Jul-17

MYR

58

Solar power project

Quantum Solar Park Semenanjung Snd Bhd

Malaysia

Oct-17

MYR

236

Solar power project

PNB Merdeka Ventures Sdn Bhd

Malaysia

Dec-17

MYR

461

Real estate development in Kuala Lumpur complying with certain green building acceditations

Mudajaya Group Berhad (Sinar Kamiri Sdn Bhd)

Malaysia

Jan-18

MYR

63

Solar power project

Indonesia

Indonesia

Mar-18

USD

1,250

Various green projects

UiTM Solar Sdn Bhd

Malaysia

Apr-18

MYR

57

Solar power project

Source: Bloomberg

THIS ISSUE DOES NOT EXIST IN CONVENTIONAL FINANCE BECAUSE GREEN BONDS CAN BE TRADED EVEN THOUGH THE UNDERLYING ASSET IS STILL BEING CONSTRUCTED. Solar energy has been the main focus of green Sukuk thus far (CREDIT: LOVE SILHOUETTE).

“The rating was at the same level as the issuer credit rating of Indonesia as the transaction fulfilled the five conditions or our Sukuk criteria. Generally, we equalise the rating on a Sukuk with that on its sponsor if the Sukuk has, among others things, sufficient contractual obligations for the timely and full payment of principal and periodic distributions. Beyond credit quality, the tradability of the Sukuk during the construction phase of the underlying asset is one of the main issues that weigh on investor appetite.

“This issue does not exist in conventional finance because green bonds can be traded even though the underlying asset is still being constructed. Because most green Sukuk are dedicated to the financing of greenfield assets and Shari’ah prohibits trading when the underlying asset is still to be built, this issue is relevant. It was resolved in the Indonesian case by ensuring a sufficient mixture of existing assets and assets to be built to allow for tradability.

Another route that the market has followed is to use financing from multilateral lending institutions during the construction phase and then package the assets in a Sukuk transaction once they are built.”

bankerafrica.net

page 44-45 Islamic infrastructure 055.indd 45

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TECHNOLOGY

AFRICA’S EXPANDED PARTNER AND TECHNOLOGY UNIVERSE REFLECTS DEEPENING ENGAGEMENT WITH GLOBAL ECONOMY

By Rob Cleasby, Head, Financial Institutions Group, Standard Bank Group

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hile Africa’s relationship with China, more than any other single country, has been central to the continent’s twodecade long growth narrative, as African economies continue to grow and diversify, the rest of Asia and the world’s relevance to the continent’s growth ambition should not be overlooked.

This is especially so as Africa’s expanding global significance comes at a time when new technologies are transforming the ability of Africans’ to engage with the world—and for the world to meaningfully access Africa.

As Africa’s sustained growth story matures into consistency, the continent’s leading markets are set to return—postfinancial and commodity crises—GDP

figures north of five per cent in 2018 and 2019. For the next two decades at least, Asia and Africa are likely to maintain their positions as the world’s two fastest growing regions. As such, from a financial services perspective, partnerships with Asian banks will be increasingly important for Africa.

Linking Asian skills, capital and know-how with Africa requires that African financial institutions reimagine not only their choice of technologies, but also their corporate structures—including their collaboration with Asian financial institutions—if they are to build accessible bridges between the world’s two fastest growing regions.

This is especially so since technology and how people transact in Asia is evolving along its own path. Making WeChat, China’s most widely-used business

and transaction platform, available and accessible in Africa, for example, is critical to linking African opportunity with Chinese investment and capability.

To this end, Standard Bank’s partnership with the Industrial and Commercial Bank of China (ICBC) represents a key financial services relationship evolution for the continent. This geo-strategic partnership— between Africa’s largest bank by assets and the world’s biggest bank—provides Africa with direct access to the highest levels of the Chinese banking system. It also provides Chinese and other Asian businesses with an easily accessible financial architecture in Africa that links directly to Asia.

Significantly, these new relationships are growing at a time of rapid technological transformation across all sectors globally.

This disruption is realising new synergies and opportunities for Africa and its expanding network of global partners.

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In addition, the new hybrids of technology partnerships that African financial institutions are developing are not only driving financial inclusion at home but also increasing the continent’s ability to attract and access global capital—all while transacting faster, cheaper and more efficiently and inclusively than ever before.

The absence of legacy investments amongst African financial institutions means that new technologies enable the continent’s financial institutions to leap-frog expensive physical infrastructure—directly to mobile. The ubiquity of M-Pesa in Kenya demonstrates how mobile based financial technologies have thrived on the continent, enabling African financial institutions to service the previously unbanked - often with the most cutting-edge technologies.

While the advantages of these types of new partnerships and technologies speak for themselves, they also create new and different risks. Containing these risks by either developing or collaborating with new technologies often requires African financial institutions to structure innovative hybrid partnerships with international firms.

For example, increased KYC legislation, especially amongst developed world financial institutions, requires that Standard Bank’s African subsidiaries list their compliance documentation on the SWIFT repository.

Providing uniform client documentation that meets global compliance standards across 20 African territories—each with different legislative and risk environments, is a complex and expensive process that can more efficiently be delivered by financial institutions present and operational within these territories. This is something that developed world institutions are prepared to pay for, or share technology, systems and processes with. The result is mutually beneficial hybrid partnerships that combine global know-how with African insight, reach and on-the-ground execution capability.

Similarly, as Africa’s economies grow, the continent’s short-and long-term insurance and state and private-pension management industry is set to evolve apace.

STANDARD BANK IS LEADING THE CHARGE IN THIS RESPECT WITHIN THE TRADE SECTOR. TOGETHER WITH LOCAL AND GLOBAL PARTNERS, THE BANK IS CURRENTLY DEVELOPING A WORLD-LEADING TECHNOLOGY PLATFORM THAT WILL PROVIDE A UNIQUE END-TO-END CUSTOMER EXPERIENCE FOR TRADE TO EXPORTERS AND IMPORTERS.

Rob Cleasby

As global pension and investment funds look to access African yield, partnerships with established, globally-compliant African financial institutions will increase.

Equally, however, since Africa is in many instances already a world leader in technology—especially mobile transaction technology, for example—many of the relationships and technology that financial institutions will need to develop will be local and home-grown. Standard Bank is leading the charge in this respect within the trade sector. Together with local and global partners, the Bank is currently developing a world-leading technology platform that will provide a unique endto-end customer experience for trade to exporters and importers.

Standard Bank has also partnered with Tier 1 banks across the globe to develop an international alliance that enables companies to connect and trade across borders. It uses sophisticated artificial intelligence to facilitate these interactions.

Increasingly too, the sophistication of what global clients are looking to accomplish on the ground in Africa requires that African financial institutions consider a broader set of partnerships and technologies.

Mozambique, for example, is currently seeing global corporates develop sophisticated secondary infrastructure aimed at making the country’s oil and gas reserves relevant to global markets. This requires an ability to manage complex foreign investment, much of this on entirely new technologies and systems. It also means managing daily transactions, on the ground, between Africa and new client markets globally, though especially in Asia. While technology is driving this evolution, an integrated local and global capability—delivered through key global partnerships with both financial institutions and new technology start-ups, platforms and providers—is seeing African financial institutions enter into entirely new types of partnerships across the continent and the world.

bankerafrica.net

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TECHNOLOGY

THE RISE

OF THE AFRICAN

(CREDIT: ANTON KHRUPIN/SHUTTERSTOCK).

DIGITAL BANK

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By Alexandre Menage, Head of Sales– Africa, Temenos.

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igital banking, by definition, needs to evolve with the times and keep up with the everincreasing speed of technological change. Historically it has been a term long associated with the rise of channel banking via the internet and mobile, but today, with open banking, the rise of fintechs and the arrival of complementary digital ecosystems, digital banking has grown to cover a multitude of products and services, channels, analytics and cyber-security. From ‘bricks and mortar’ to call centres; chatbots using AI to Personal Financial Management (PFM); digital banking now extends to a plethora of channels and engagement opportunities and omnichannel engagement.

In the Sub Saharan region of Africa, the growth in mobile adoption has seen overall subscriber penetration reach 44 per cent in 2017, up from just 25 per cent at the start of this decade (GSMA). With this penetration, mobile money services have driven a phenomenal rise in the uptake of mobile accounts, accelerating the need for innovation in product development to address financial inclusion and to continue to open up the broader banking market.

According to the GSMA Mobile Money Programme, East Africa’s active 90-day mobile money accounts number 73.2 million, compared to 121.9 million in the Sub Saharan region. These accounts are often offered together with services covering a number of products such as credit, insurance, and cross-border remittances; the growth in the market has been vast and fast. Digital banking platforms are key to compete in this area.

These platforms seek to deliver both speed to market and also speed of service to the end customer, whilst offering the end-customer relevant messaging at the

Alexandre Menage

right time using the right channels. The opportunities to acquire, maintain and retain customers can be best serviced using data-driven customer insights provided by embedded analytics.

As customers learn and adapt to the evolving financial offers in market, digital banking technology will undoubtedly become both more comprehensive and complex in the future. API integration with the niche services being created by fintechs will be important as part of driving innovation and ensuring maximum financial inclusion. This, however, needs to be balanced with the requirement to avoid costly upgrades which can result from from multiple API integrations. The core capabilities for a digital bank should be integrated and easily upgradeable; moving with the times and leveraging the R&D budgets of software providers and allowing banks to focus their budgets on the customer experience rather than the upgrade of a portfolio of integrations.

Temenos Front Office Suite is a digital banking platform which is integrated; upgradeable; omni-channel and datadriven. Product innovation often needs transactional capabilities that are sometimes not available in legacy core banking systems. Our software is built from the ground up, allowing us to selectively enable back-office capabilities to support a progressive migration away from rigid legacy technologies towards an agile digital banking landscape.

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TECHNOLOGY

TRANSFORMING BRANCH FRONT END

By Rajashekara Maiya, Vice President - Business Consulting and Product Strategy, Infosys Finacle

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he branch as a channel has been the foundation of traditional banking for centuries. However, setting up and maintaining branches can be expensive. With the increasing digital disruption and competition from new age digital only banking service providers, banks are today in a dilemma – to rethink branches to gain competitive advantage or to rely on less-expensive digital channels and give in to the disruptions brought in by the new age challengers and other digital attackers. Over the past few years, many banks have opted to slowly reduce their branch footprints in order to achieve operational efficiencies. However, on the other hand, there are many banks that are also reimagining their branch models and upskilling the talent, equipping the new future branches with innovative digital solutions that empower the workforce to engage the customers in a unique manner.

So, what is the way forward for the branch led model of banking?

ARE BRANCHES REALLY DEAD? NOT REALLY! Though digitally savvy millennials seem to prefer the new age digital banking experience, many continue to express a preference for physical interaction, for faceto-face contact, advice and reassurance in their financial planning. According to a Celent Report, 61 per cent customers still choose to open their accounts in person, as they felt more comfortable talking to someone in the branch.

According to Efma and Synechron’s World Branch Report 2017, The Evolution of Branch Banking, 97 per cent of the bankers still believe that branches add value to the business. The human touch is seen as necessary to bring in an emotional aspect to customer engagements.

FUTURE BANK BRANCH – YOUR NEW DIGITAL AMBASSADOR Bankers are now looking at how digital transformation can switch the operational

PHOTO CREDIT: Shutterstock/PopTika

expertise from systems to customers.

By taking advantage of digital innovation, banks can transform the branch network to offer banking services that are personalised, engaging, and relevant for their role as future digital bank. As per research (World Branch Report 2017), the top focus areas for branch transformation cited will be to improve customer service/ engagement (42 per cent), introducing digital interactive experiences (38 per cent) and self-service automated technologies (36 per cent).

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branch employees will increase the digital penetration of the customer base and reduce transaction costs.

• The advisory: Equipped with need analysis tools and simulators, actionable insights, customer profile and profitability summary, branch employees will be able to offer fullservice advisory services for complex products and financial planning.

• The problem solver: Powered by a single unified view, branch employees will be able to provide first-contact resolutions and specialised advice.

BEFORE YOU REDUCE THE PHYSICAL NETWORK, USE TECHNOLOGY TO ENGAGE CUSTOMERS FOR A DIGITAL OMNICHANNEL EXPERIENCE. Rajashekara Maiya

While technology will undoubtedly play the leading role in the future branches, the branch employees will increasingly become universal bankers, powered by digital solutions. A universal banker is the one who can serve all the branch personas and hence lead to workforce optimisation.

The branch will have to reinvent and reposition itself variously as: • The digital ambassador: Using digital tools built on advanced technologies,

FROM SMART TO SMARTER – THE WAY FORWARD The branch transformation and the optimisation of the branch assets is more than just being digital. The key actions for customer acquisition require a unified single view of the customer, staff reskilling to channelise the efforts into high-value creation activities such as sales and advisory and revisit the traditional branch metrics to include Omnichannel customer experience.

At the time, when the differentiating factor of the branch is the emotional connect for developing relationships and transforming customer experiences, the branch footprint needs to be strategically planned on customer segment needs, business as well as location. The future branch also needs to be seen as a centre of cutting edge customer experience technologies like touch screens, video conferencing, chatbots, etc, to increase adoption of self-interactive channels.

Even as branchless banking catches on as a trend, branches will continue to remain at the core of customer relationships. Powered by technology and the right new age branch solutions, the future bank branch will evolve and continue to stay relevant in the digital era.

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TECHNOLOGY

HYPERAVAILABILITY: THE COMPETITIVE EDGE FOR DIGITAL BANKS

By Kate Mollett, Regional Manager for Africa South at Veeam

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ith downtime and unavailability significantly impacting on the reputation of a bank, fintechs are in a prime position to embrace hyper-availability and gain the competitive advantage over the incumbents. We explore the impact it is making in the South African banking sector.

Anybody still questioning how downtime can influence a bank, should take a lesson from what is happening at Capitec. Once the darling of the local banking sector, sporadic downtime experienced on its digital banking platforms has seen the bank

lose the top spot as the best digital bank in the country. Customer satisfaction levels are directly linked to the availability of services.

Those financial institutions unable to meet those demands will become increasingly irrelevant in the world of always-on hyperavailable access to digital banking.

The South African banking industry is a fast-paced environment with new banks launching soon. The message is clear, if your services are not available to serve customers on the platforms and times they want, you will see satisfaction levels drop and customers migrate to the newcomers.

DIVERSIFYING SERVICES The 2018 Budget Speech highlighted the support government is giving to expand competitive, affordable banking services to those who previously did not have access to it. This is where digital banking services delivered on mobile platforms become vital.

Already, three banking licences were granted last year for institutions that will have significant digital capabilities and bring more competition and innovation to the sector. I am excited about these new digital banks, their offerings, and how they are going to present it to potential customers such as myself. According to PWC’s report The future of banking: A South African perspective, non-traditional players in the South African market are increasingly exploring new opportunities, enabling them to challenge incumbents and continually change the state of financial services in the country.

And this is reflected in how consumers use banking services. Not being limited to visiting branches, they can bank from their mobile devices wherever they are, irrespective of the time of day. However, if services are disrupted (as was the case with Capitec), the reputational damage is significant. And while Capitec has born a lot of the brunt when it comes to accessibility of digital services, the reality is that most of the big banks in the country have experienced system outages and problems at one time or another.

BECOMING MORE INTELLIGENT The newly arriving digital banks will soon realise that trust is earned by being alwayson and available. They have only one time to launch and cannot afford downtime.

Imagine the financial implications, not to mention the loss of customer confidence and the damage to brand integrity they will experience if their customers are unable to access services. Downtime is no longer acceptable, especially if your brand is built on being digital first.

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of services in the event of a disaster as well as having the capabilities to more intelligently manage the data at one’s disposal.

Kate Mollett

I AM EXCITED ABOUT THESE NEW DIGITAL BANKS, THEIR OFFERINGS, AND HOW THEY ARE GOING TO PRESENT IT TO POTENTIAL CUSTOMERS SUCH AS MYSELF.

Th i s i s w h e r e i n t e l l i g e n t d a t a management becomes a fundamental principle as a more effective way of managing uptime. In so far as availability has been ‘limited’ to backup, recovery, and business continuity, intelligent data management adds a critical component to the mix – that of data accessibility and how it is delivered to stakeholders.

It is this approach that is driving forward-thinking institutions to prepare themselves for a more connected business environment that fulfils all customer requirements.

Take BankservAfrica as an example.

To maintain the reliability and robustness of the South African National Payment System (NPS), it invested in state-of-theart data centres and disaster recovery strategies. Moreover, it modernised the way it protected its data by taking an integrated approach to its systems and services. For BankservAfrica, it is all about delivering continuous services and having round the clock availability.

This should be a valuable lesson for other financial institutions in the country.

Hyper-availability requires the continuation

IMPROVED INSIGHTS When it comes to intelligent data management, banks can use the information at their disposal to better understand customers and their preferences, optimise sales channel strategies to fit their current needs, provide improved service, and retain customers. Looking at business growth prospects, this data can be used to find ways to cross-sell to customers and deliver new digital services and experiences.

Of course, this is not without its challenges as banks need to not only manage and mine the data they produce themselves, but also ensure there is an always-on digital experience for customers. The EY annual FinTech Adoption Index Report 2017 forecasts a 71 per cent growth in fintech adoption for South Africa, with the country ranking third in future growth behind only China and India.

Globally, fintech adoption is predicted to reach 52 per cent. And according to the EY report, this adoption by digitally active consumers in emerging markets (that include Brazil, China, India, Mexico, and South Africa) average 46 per cent, considerably higher than the global average of 33 per cent.

Looking ahead, fintechs and banks alike will need to examine how they are prepared for an always-on environment using a hyper-availability strategy that is reflective of the competitive environment in South Africa. The new digital banks need to design their systems from availability down instead of from the platform up. Availability should no longer be seen as part of the last mile, but rather the starting point. Hyper-availability has become the norm and everything else is unacceptable.

bankerafrica.net

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INVESTMENTS

Oil producing West African countries in particular have experienced economic downturn due to low commodity prices (CREDIT: WILLIAM POTTER/SHUTTERSTOCK).

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By Afamefuna Umeh, Head of Fixed Income, SSA, Exotix

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he investment banking sector in West Africa is beholden to a large number of external market dynamics, everything from the state of the global economy to the presence of a reliable legal and regulatory framework and political stability on a local and regional level.

In general, the strengthening of the economies in West Africa, the GDP growth prospects and improving capital markets architecture, coupled with rising oil prices, bodes well for corporate investment banking prospects.

M AC R O E C O N O M I C BAC K D R O P AND CHANGES IN THE REGULATORY ENVIRONMENT Nigeria, Ghana and Senegal are the biggest economies in West Africa. They have a long list of regulatory authorities, and although there have been cases of regulatory dispute with large foreign companies in West African countries, the regulatory environment remains broadly friendly.

The tax environment is also stable.

In Ghana, the general corporate income tax (CIT) rate is 25 per cent, while CIT in Nigeria and Senegal are charged at 30 per cent. These rates have been in place in Nigeria and Ghana for the past decade, however the rate was raised in Senegal from 25 per cent in 2014.

Macroeconomic variables in the top West African countries are looking good.

Inflation has greatly reduced in Nigeria (currently at 11.32 per cent compared to its 12 year high in January 2017 at 18.7 per cent) and Ghana (at 9.9 per cent compared to almost 20 per cent in 2016) but increased in Senegal (at 0.3 per cent in August 2018 against -0.3 per cent in July 2018). Real GDP growth forecasts for 2019 are 2.3 per cent (Nigeria), 7.6 per cent

Umeh points to the recent fine issued to MTN in Nigeria as an example of regulation coming of age (CREDIT: GEORGE OSODI/BLOOMBERG).

(Ghana), and seven per cent (Senegal).

Also, the general government net lending/ borrowing (per cent of GDP) forecast for 2019 is more meaningful now that there is an outlook for higher revenue compared to expenditure in 2019 versus 2018.

Furthermore, the Monetary Policy Rate (MPR) of Nigeria has been held constant at 14 per cent. The benchmark interest rate in Senegal was last recorded at 4.50 per cent. The interest rate in Senegal averaged 3.92 per cent from 2010 until 2018, reaching an all-time high of 4.50 per cent in December 2016 and a record low of 3.50 per cent in September 2013.

The Bank of Ghana kept its prime lending rate steady at 17 per cent at its July 2018 meeting, as widely expected, and after trimming it by 100bps in the previous meeting. Policymakers said the decision is consistent given the circumstances and especially regarding the global outlook.

The Committee noted that the inflation rate trended up in recent months boosted by the cost of petroleum and transportation, remaining well-anchored and retaining its trajectory over the medium-term.

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INVESTMENTS

REGULATORY ENVIRONMENT MTN recently faced an $8 billion fine relating to ‘illegal’ dividend repatriation claims by the Central Bank of Nigeria. This was attributed to a change in the capital structure of the firm from 2006 to 2007 (different from what was originally stated in its Certificate of Capital Importation).

The problem is not the change in capital structure but the lack of approval of repatriated dividends from the CBN. The bigger picture is that due to foreign exchange instability, a refund of this amount which is in foreign currency (US dollars) may be required to be done at the current exchange rate which will lead to an estimated loss of $4 billion. Despite the dispute in Nigeria, the company is preparing for its IPO in Ghana. A predictable and reliable regulatory framework coupled with a strong, independent judiciary encourages investor confidence in the country over the long term.

WEST AFRICA MONETARY ZONE AND CROSS BORDER BUSINESS OPPORTUNITIES The West African Monetary Zone (WAMZ) is a monetary and customs union with a common currency, the CFA Franc, launched in 2015. Unified West African investments have implications for foreign investors as they now have access to more countries by just investing in the zone. This helps the investor to take advantage of some underdeveloped sectors in some of the countries and get good ROI while also helping to develop the countries themselves.

Some of the very attractive crossborder opportunities include investing in infrastructure (which remains one of the under-developed areas). Importantly, investments in education and human capital development will be game changing for the region, although they may not be as attractive to foreign investors as the payback period is longer.

Real estate may be an appealing option, as development tends to increase the value of property and assets in the category act

IMPORTANTLY, INVESTMENTS IN EDUCATION AND HUMAN CAPITAL DEVELOPMENT WILL BE GAME CHANGING FOR THE REGION, ALTHOUGH THEY MAY NOT BE AS ATTRACTIVE TO FOREIGN INVESTORS AS THE PAYBACK PERIOD IS LONGER. –Afamefuna Umeh, Head of Fixed Income, SSA, Exotix

as a good inflation hedge. The challenge for investment banks in the region is the need to maintain a strong understanding of the region as a whole, the strengths and weaknesses of the individual markets, as well as the dynamics which the WAMZ creates for cross-border opportunities.

Having a narrow expertise on one local situation will no longer cut it.

THE ‘AFRICA RISING’ RHETORIC HAS NOT MATERIALISED West African countries (especially oil producing ones) have seen some economic

downturn in the past few years due to dwindling oil prices, corrupt practices of the ruling government and also an increase in terrorist activity. This has distorted some of the forecast/fundamentals that were considered when some investors committed their funds years ago. The impact of this is that investor returns would have been distorted, discouraging some from continuing business, leading to the exit of their investment. There have however been some persistent investors who stood with their investments amidst the economic downturn.

These investors may not have reached their initial expected ROI but they have definitely had good returns and have the potential of getting even better returns in the coming years.

Africa as a whole remains a very attractive high growth region for foreign investors, particularly Nigeria and Ghana. Even in light of regulatory hassles and currency risks that may affect business, investors have not relented in their bid to invest.

It is also worth noting that the exchange rate has been relatively stable in the past few months and the outlook looks even more attractive. Local investment banks should be well placed to take advantage of this appetite.

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EVENTS

The exhibition area featured an array of companies demonstrating the next generation in banking technology.

THE FUTURE OF FINTECH

At Seamless East Africa the future of the banking and financial services industry took centre-stage Kosta Peric, Deputy Director, Financial Services for the Poor Program, The Bill & Melinda Gates Foundation gave a keynote on connecting customers to generate growth.

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The headline panel discussion on the first day centred on how digital financial services can be harnessed to accelerate financial inclusion.

S

eamless East Africa was held at the Radisson Blu Hotel in Nairobi, Kenya and brought together delegates from across the financial services industry to discuss the unprecedented period of disruption that the industry is experiencing. From banks themselves, to telecommunication companies, insurance agencies and merchants have all had to adapt to this changing landscape. It is within this environment that Seamless East Africa sought to address the major challenges and opportunities facing the industry.

This year marked the fourth edition of the conference and saw over 800 speakers and delegates from across the continent as well as further abroad travel to Nairobi. The exhibition space saw more than 50 tech suppliers featuring the next generation in

technology that will further transform the banking and finance landscape.

Day one opened with a keynote address

by Ismail Ahmed, Chief Executive Officer, WorldRemit discussing the role that e-wallets have in removing friction and cash from the system. Indeed, Ahmed suggested, e-wallets have the advantage of potentially lifting people out of poverty by providing access to financial services for those whom previously had not been able to access traditional financial services infrastructure.

Kosta Peric, the Deputy Director of the Financial Services for the Poor Program at The Bill & Melinda Gates Foundation touched upon this further in his following keynote. He noted that for a billion people worldwide the only access that they have to financial services is by physically walking to a branch or institution—illustrated by the

pair of sandals which accompanied him on stage [editor’s note: for further information on the work The Bill & Melinda Gates Foundation has done in the field of financial inclusion on the African continent you can find our long-form interview with Michael Wiegand, the Director of the Financial Services for the Poor Program in BA #52].

Financial inclusion in general occupied a central part of many of the discussions at Seamless East Africa as technology as rapidly accelerated the degree to which the unbanked have been reached and brought into the formal financial system.

Indeed, the keynote panel featuring C-suite executives from a variety of institutions focused on this subject in particular and the way in which digital financial services can be used to accelerate financial inclusion efforts.

bankerafrica.net

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AWARDS

BANKER AFRICA – NORTH AFRICA BANKING AWARDS 2018

VOTING ANNOUNCED Voting has begun in the annual Banker Africa– North Africa Banking Awards

T

he annual Banker Africa—North Africa Awards is a programme open to all banks and financial institutions in the region. The aim of the Awards is to recognise outstanding performance and excellence in the financial services industry.

Shortlists have been compiled by our group of experts. The North Africa Awards are designed to reward innovation and the ability to gain market share. As always the winners will be selected by the registered readers of CPI Financial products and services—in other words, your peers in the financial services industry.

POLLS HAVE OPENED Voting has opened for the Banker Africa—North Africa Banking Awards 2018 on voting.bankerafrica.net.

Each shortlisted entry will be automatically linked to the institution’s own homepage online. In addition you may wish to read supporting material for the specific Award, where provided by the shortlisted institutions before casting your votes. Once voting closes, the results will be tallied and revealed in the subsequent edition of Banker Africa.

REWARDING EXCELLENCE The core philosophy of CPI Financial, the publisher of Banker Africa, is transparency, ensuring accurate reporting of economics and financial matters, the factors determining the future of the banking and finance community and the business deals driving the industry forward. Our Awards programmes are designed to reward and promote excellence and competition in the drive to set new standards in the industry in quality of service, best practice and financial performance.

The financial institutions that win one or more of the Banker Africa Awards in 2018 and in future years will be those offering best-in-class services that meet the needs and

exceed the expectations of their customers. They will, truly, be winners.

In each of four regions, North Africa, East Africa, West Africa and South Africa, we hold separate Awards competitions. With this issue of Banker Africa we are launching the fourth West Africa Banking Awards, highlighting dozens of institutions across several key categories: REGIONAL Best Islamic Bank - North Africa Best Islamic SME Bank - North Africa Best Islamic Retail Bank - North Africa Best Commercial Bank - North Africa Best Digital Platform - North Africa Best Corporate Bank - North Africa Best Retail Bank - North Africa Best Digital Banking Solution – North Africa

COUNTRY AWARDS Best Investment Bank - Egypt Best Corporate Bank - Egypt Most Innovative Bank - Egypt Best Retail Bank - Egypt Best Online Platform - Egypt Best Commercial Bank - Egypt Best SME Bank - Egypt Best Digital Bank - Egypt Best Private Bank – Egypt

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Islamic Business & Finance MIDDLE EAST AWARDS 2018

Save The Date for Dubai!

6th December 2018 Jumeirah Emirates Towers Dubai

For more information please contact CPI Financial’s events team Tel: +971 4 391 4682 or Email: events@cpifinancial.net

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THE VIEW

PHOTO OF THE MONTH

Akere Muna, presidential candidate and chairman of the International Anti-Corruption Conference Council, speaks during an interview at his home in Yaounde, Cameroon. Cameroon will hold a presidential election on 7 October 2018. (CREDIT: ADRIENNE SURPRENANT/BLOOMBERG)

Active Mobile Wallet Users in Select Countries (2017) User count in millions China India Kenya Bangladesh Pakistan Tanzania Ghana Uganda Philippines

500M 100 30 24 19 19 11 10 9

African countries have greatly benefited from the uptake of mobile wallet technology with its usage widespread. Despite their smaller population sizes many countries on the continent have a larger base of mobile wallet users than other emerging and developing economies. (CREDIT: CITI/ATLAS/QUARTZ)

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SUMMIT

Providing you with actionable investment advice 29.11.18

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