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MICROFINANCE

AFRICAN BANK INVESTMENTS LIMITED

GDP Growth Rates, Unweighted Annual Average

6 5 4

Asian Countries

3

African Countries

2 1970s 1980s

1990s

2000s 2011-15

Source: The Economist/IMF

Household Debt (ZAR trillions)

Source: SARB

Bank Loans to Private Sector by Type of Credit (%)

AN OVERVIEW OF SSA ECONOMICS Within the Sub Saharan African context, a number of countries have seen remarkable growth in recent years with GDP growing at average rates of c5.5%. An important note is that countries such as South Africa (the continent’s largest economy), Nigeria and Kenya have emerged as leading economic power houses. In addition, Africa is seeing its population emerging out of poverty and this, together with a positive economic outlook, has contributed to a growing African middle class. This emerging middle class is driving the demand for goods and services. As a result, large global companies are setting up offices and listings in Africa. Examples of global companies with exposure into the fast emerging African consumer include the likes of Nestle, Heineken, Diageo, SABMiller, Shoprite, Massmart (Wal-Mart) and major car brands such as Toyota. Another key trend is that financial institutions have begun to increase their African footprint. The financial sector in Africa now makes up a sizable percentage for the listed market capitalization. The big retail banking operation have expanded their coverage across the continent with Standard Bank from South Africa (20% owned by ICBC) now operating in 17 countries while EcoBank’s operations now extend across central Africa from Ivory Coast to Kenya. This together with an alliance with Nedbank South Africa (recent target of HSBC) gives both banks the ability to transact across Sub Saharan Africa. Amalgamated Banks of South Africa (ABSA) was also purchased by Barclays Plc in order for the UK bank to enter the African retail banking sector. THE SSA MICRO FINANCE SECTOR Majority of Africans still “locked out” from banking services. Our assessments reveal that the majority of Africa’s population remains “locked out” of the continent’s financial sector, despite Africa having a booming financial services sector. A key highlight is that banking services remain, to a large extent, a preserve of urban dwellers. In Zambia, for example, only 25% of the country’s population has access to banking services. In Namibia, about 48% of the population has access to formal banking channels and for Botswana the figure is around 46%. South Africa, on the other hand which is said to have the continent’s most advanced economy has c25% of its population excluded. Insurance penetration rates, on the other hand are still low across Africa. On average, Africa’s insurance penetration rate stands at around 3.0%. Is Micro financing the solution to “banking the unbanked”? As a sub-sector of the financial sector, we have seen micro financing activities expanding across the continent. Micro finance operators have changed the African landscape by providing banking services to individuals who previously only had the ability to purchase what they could immediately afford (with cash). The provision of loan funds for vehicle or housing by micro finance institutions has also opened up the consumer’s ability to progress up the value chain and into the emerging middle class. Some of the key players in Sub Saharan Africa include companies such as ABIL (South Africa), Blue Financial Services (South Africa), Letshego Holdings (Botswana) and Real People (South African with exposure into East Africa, unlisted). SOUTH AFRICA AS AN EMERGING ECONOMY South Africa dominates Africa’s financial services industry, accounting for 30% of all of banking assets on the continent. Of the total assets (USD 935.0bn) of Africa’s top 200 banks, about 46.0% are held by South African institutions. Virtually all Sub-Saharan Africa’s top 100 banking assets are held in South Africa, Nigeria, Angola and Mauritius.

Source: SARB

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Equity Research in Africa, Like an Electric Train Africa is picking up, a True Emerging Market  

Economic analysis of Africa as a whole, as well as of particular countries and sectors, with special regard to their potential as investment...

Equity Research in Africa, Like an Electric Train Africa is picking up, a True Emerging Market  

Economic analysis of Africa as a whole, as well as of particular countries and sectors, with special regard to their potential as investment...

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