+
Sources of capital on the continent

Banks

Banks play a crucial role in the efficiency of an economy by allocating funds from savers to borrowers, at ideally, the lowest cost available in a given market. Banks are critical for facilitating financial inclusion in developing economies. Financial inclusion is imperative for poverty reduction and inclusive economic growth. Considerable economic and demographic variations across African countries have translated into vastly different banking sectors per country.

Pension funds Insurance assets under management in Africa Development finance institutions Banks

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.

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%.

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

Next AUM

Sources of capital on the continent

This section highlights and analyses the main institutional investors on the continent, including the sources of capital and the size and depth of these various pools of capital.

learn more

Pension funds

Most retirement income in Africa is funded by its governments, but pension coverage on the continent remains low compared to the rest of the world.

learn more

Insurance assets under management in Africa

The African insurance industry is largely underdeveloped when comparing it to the rest of the world, with its gross premiums written (GPW) accounting for 1.56% of global GPW.

learn more