The banking industry in Africa

Financial depth is a measure used to capture the financial sector relative to the economy and is defined as the size of a country’s financial institutions relative to its GDP. The measure used for financial depth is private credit as a percentage of GDP. A high rate represents higher access to capital for customers within an economy. Financial depth varies significantly across the various African markets.

Interestingly, Nigeria has the highest population in the continent, but it also has low private credit to GDP at 10%. This presents opportunities for the banking sector to increase its penetration of the country’s underbanked areas. Nigeria’s gross national income (GNI) is within the low income (LIC) to low-middle-income (LMIC) range at USD 1 960. Among African countries, Mauritius has the highest private credit to GDP at 95% and a GNI of USD 12 050, which is within the upper-middle-income (UMIC) and high income (HIC) range, while South Sudan has the lowest at 0.26%.

Among the comparable emerging markets, China has the highest private debt to GDP at 163% with a GNI of USD 9 470 which is in the UMIC and HIC range, while Mexico has the lowest at 22% with a GNI of USD 9 180 which is also in the UMIC and HIC range. An analysis of the African regions shows that the Maghreb region has the highest private credit to GDP on a weighted average basis at 25%. Southern Africa ex SA has the next highest private credit to GDP at 21%, followed by Francophone West Africa at 17%.

^{Source: Fitch Solutions, RisCura analysis}

Note: For the current 2019 fiscal year, low-income countries are defined as those with a GNI per capita of US$995 or less in 2017, lower-middle-income countries fall within the US$996 to US$3 895 range and upper-middle-income are between US$ 3 896 and US$ 12 055