The Rise ↕️ of African Banks 🏦: How Financial Institutions are Driving 🚖Economic Growth
Which bank does it for you?
Hello 🤗 Innovators
What a year this has been! We are slowly rounding up the first half of the year, and what better way to enjoy the last Saturday of the first half than with Consonance 🤷🏽♀️?
Most important is the fact that you are still on this journey with us even as we set out for more. You keep coming back and we keep delivering 🎁. A big shout-out to all our subscribers.
This newsletter would be particularly brief, to give you time to hop on the bouncing castle 🏰, as much as you want, just to unleash your inner child.
Happy Children’s Day 🎉🎈🎊🎂🎇
Today similar to any other Saturday, when the alarm goes off at 12 pm here at Consonance, we have innovation on our plates. The Banking Industry in Africa has come such a long way and we love the growth for Africa! We love it so much that we have dedicated today to celebrating as well as criticizing the systems and the regulations.
Before we let the cat out of the bag…
You know what’s next guys, it’s the meme of the day from Tech Twitter.
Now to the issue of the day.
Banking in Africa has a rich and diverse history that dates back centuries. Various factors, including colonization, economic development, and technological advancements have influenced the evolution of banking on the continent.
Let’s travel back in time…
This is almost the job of a historian, but for the love of innovation and growth, let’s go on the journey.
During the colonial period, European powers established banking institutions primarily to facilitate trade and economic exploitation. European banks, such as Barclays (now Absa), Standard Bank (now Standard Bank Group), and Société Générale, played a dominant role in providing financial services in Africa. They focused on serving the interests of colonial powers and the European settler population rather than the local African population.
After independence and nationalization, many African countries began to gain full political autonomy.
In the 1980s and 1990s, many African countries embraced economic reforms and initiated financial liberalization policies. These reforms aimed to encourage private sector participation, attract foreign investment, and modernize the banking sector. As a result, several African countries began privatizing state-owned banks, opening up the industry to foreign competition, and implementing regulatory reforms to improve transparency and governance.
This was only the beginning of Africans saying enough is enough.
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The Era of Commercial Banks
Over the past few decades, African banks have experienced significant growth and expansion. They have expanded their networks of branches and adopted new technologies to provide better access to banking services. Regional integration efforts, such as the establishment of regional economic communities and common currency zones, have further facilitated cross-border banking activities.
Where Africa is concerned, it is impressive to see the homogeneity of the banking structures. Just like the paper currencies themselves, these banks maintain similar structures in different countries, states, cities, and communities. It’s been said that this is a kind of branding for easy identification, either way, we love to see Eco Bank always looking like ancient Greek structures 😂😂.
Banks that have marked their territories in the African 🌍 Continent are Stanbic IBTC Bank, United Bank of Africa, and Ecobank to name a few.
For Instance in Nigeria, the CBN is the regulating body and the Banking Act of 1952 laid the foundation for modern banking in Nigeria.
The Central Bank of Nigeria (CBN) serves as the regulatory authority overseeing commercial banks in Nigeria. It formulates policies, issues licenses, and ensures compliance with regulations to maintain stability and soundness in the banking sector.
It is responsible for a lot of things in the Nigerian economy and thanks to its ever-changing policies, it’s still safe to say that we are in the commercial era. Irrespective of the rise of MF Banks we are about to discuss soon, commercial banks already engraved their names in our hearts a long time ago.
The Boom of Free Transfers
It is only fair to say that Kuda started it. Their entire brand was built off of 25 free transfers per month, and the correspondence from the public was “What more does a boy need?”
People jumped on it like it was the holy grail. However, it didn’t take long to realize that only Microfinance banks happened to be pulling this off at the time. This is not to say that commercial banks can’t pull this off, but why don’t they?
Some argue that these Microfinance banks use it as a ploy to reel in the potential loan takers or future interest payers (take your pick), cause who’s to say otherwise? You’ll find yourself arguing with facts if you go any further.
However, in light of the Cashless policy, two banks come to mind. Palmpay and Opay.
Both Palmpay and OPay witnessed rapid growth and intense competition in the Nigerian fintech market. They heavily invested in marketing, customer incentives, and user acquisition strategies to gain market share.
They also gained an edge with their free transfers. Their user-friendly interfaces, convenient services, and competitive pricing attracted a large number of users, especially among the tech-savvy and unbanked populations. For these, we have to give them their flowers.
These two heroes had everyone in awe with the super-fast transfers because transfers literally go through with the speed of light.
The companies also introduced additional features and services to differentiate themselves. For instance, OPay launched OWealth, a platform offering investment and savings products, while Palmpay introduced Palmscore, a loyalty rewards program.
This is why we remain innovation inclined, it’s simply because we know there’s much more.
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Thanks for always.
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