I. B. MATSENKO

Candidate of Economic Sciences

Institute of Africa, Russian Academy of Sciences

Keywords: Africa, financial development, regional banks, pan-African banks, mergers and acquisitions

On the African continent, new and growing local banking groups are being formed with branches in several countries. These regional banking organizations (so-called pan-African banks, as defined by the IMF experts) are expanding their presence on the continent, creating cross-border networks and absorbing other banks, including foreign ones, which have traditionally been dominant here.

New pan-African players are driving the development of financial services and economic integration in Africa, helping unlock the potential of a fast-growing region.

However, this relatively new process in the financial development of African countries (such as microfinance and mobile banking - the provision of services through mobile means of communication) began with a low initial level and significantly lagged behind the developing countries of Asia and Latin America.

STARTING POINT

Despite the differences in the degree of development of the banking sector in different countries of the continent, it is generally accepted to speak of its weak development in relation to Africa.

The main disadvantages are low capacity, low efficiency, and limited public access to banking services. Thus, the number of bank branches here is extremely small (only 3.1 per 100 thousand adults, compared to 9.6 in other developing countries), and the volume of banking assets in most African countries does not exceed the assets of one medium-sized bank in developed countries. African banks, especially in low-income countries, do not operate efficiently enough, due to their small size, high operating costs, significant risks and lack of competition. ¹

Three-quarters of the African adult population (compared to almost half of adults in the entire developing world) they do not have a bank account due to the lack of sufficient money, the remoteness of banks (especially in rural areas), traditional distrust of banks, etc. As for the coverage of private sector enterprises with banking services in Africa, only a fifth of them receive loans, which is 2 times less than in developing countries in other regions. Insufficient access to credit for small and medium-sized enterprises hinders their development, limiting the potential for growth and modernization of African economies.²

One of the factors contributing to the low financial intermediation of African banks is that most of them often avoid providing loans to the private sector in favor of safer government securities. As for the actual lending activity of commercial banks in Africa, it still focuses mainly on providing short-term loans, while the objective need of the continent's economies for medium-and long-term investment lending has sharply increased.

SIGNS OF CHANGE

Over the past decade and a half, there have been some positive changes in the banking sector in Africa, which have resulted in an increase in the number of bank branches and their liquidity, the development of microfinance, the emergence of new types of credit intermediaries, the introduction of innovative technologies in banking, etc. The increasing role of African banking structures in the current economic dynamics is largely due to the high rate of growth in the country's economy.

economic growth (5-6% per year) in many countries of the continent in 2000-2008 after decades of stagnation.

One of the notable developments was the expansion of microfinance. Its importance in meeting the financial needs of the poor in Africa, who lack access to official banking services, cannot be overemphasized. Access to various microfinance services (savings accumulation, access to credit, money transfers, etc.) enables low-income families to invest in small and medium-sized enterprises, spend them on improving nutrition and living conditions, protecting children's health and education.

In Africa, microfinance has been developing since the late 1990s and early 2000s, making extensive use of traditional forms of credit relations within local communities. According to the UN, microfinance grew by more than 1,300% ⁱⁿ Africa between 2002 and 2012.3 Microfinance institutions (MFIs) currently operate in 45 countries in Africa, with more than 800 clients and 71 million clients. MFIs were most developed in Kenya, South Africa, Nigeria, Ghana, Tanzania, Uganda, Senegal, Cameroon, Benin, the Gambia and Ethiopia ^.4

The prospects for the development of a comprehensive microfinance system in Africa are linked to the expansion, in addition to microcredit, of financial services such as savings, cash payments, payments, etc., which are increasingly in demand among the poor, which will allow for the future expansion of the financial base of microfinance in order to involve the new poorest segments of the population.

A notable development in recent years in the process of expanding financial services in African countries has been the introduction of innovative technologies in banking to serve the poor, in particular the so-called mobile banking, which was mentioned above. The rapid growth in the use of mobile telephony in Africa over the past 15 years (from 2 million mobile subscribers in 1998 to 735 million by the end of 2012.5) shows that these and other modern telecommunications technologies have a huge potential to connect to financial services for people outside the banking sector, especially those from rural areas. remote and hard-to-reach areas.

The introduction of mobile communication technologies in banking allows subscribers to make payments, transfer and withdraw funds from accounts without visiting banks, but simply by clicking on a few buttons of a cell phone.

The World Bank estimates that sub-Saharan Africa leads the way in mobile banking (12% of the adult population, compared to 3% in South Asia, 2% in Latin America, and less than 1% in the rest of the world). Kenya ranks first (58% of adults), followed by Tanzania, Uganda and Somalia (35%). In another 9 African countries (South Africa, Botswana, Ivory Coast, Mali, Ghana, Namibia, Rwanda, Zambia and Zimbabwe), the rate of mobile banking users among the adult population is at least 10%. According to some analysts, Africa is currently experiencing a "mobile revolution" ⁶.

Another new phenomenon that is significantly changing the current banking landscape in Africa is the formation and spread of pan - African banking groups in various parts of the continent.

Pan-African banks originate mainly in the countries with the most developed economies-in South Africa, Nigeria and Morocco, as well as in the state that influences the entire East African sub-region - Kenya. At the same time, there are exceptions. One of the leading Pan - African banks, Ecobank, is headquartered in Togo, one of the continent's least developed countries. It was founded in the mid-1980s under the auspices of the Economic Community of West African Countries (ECOWAS).

Among the largest pan-African banks, the IMF experts include 7 banking groups. These are Ecobank Transneshnl (Togo), Standard Bank Group (South Africa), United Bank for Africa (Nigeria), Bank Marocain de Commerce Exterior / Bank of Africa (BMCE/ BOA) (Morocco), Attijarivafa Bank (Morocco), Oragroup (Togo) and Group Bank Central Populaire (Morocco) ⁷.

Each of these banks has a presence in at least 10 African countries: 3 of them operate in Morocco, 2 in Togo, and one each in Nigeria and South Africa. Other regional banks, primarily from Kenya, Nigeria and South Africa, have branches in at least 5 countries.

In general, according to IMF analysts, the largest pan-African banks play a systemically important role in the banking sector of 36 sub-Saharan African countries-approximately 80% of the region's territory-and are now more important there than the long-standing traditional players-European and American banks.⁸

WHY CROSS-BORDER BANK ACTIVITY IS GROWING

The rapid expansion of cross-border activity of African banks began from-

relatively recently, only 10 years ago. While banks such as South Africa's Standard Bank and Togo-based Ecobank had subsidiaries as early as the 1990s or even earlier, other banks have only begun to seriously expand their regional capacities in the last decade and a half. According to available data, from 2006 to 2010, the number of subsidiary banks almost doubled - from ⁴⁸ to 88,9.

Some banking groups have expanded their presence by combining investment in new projects with the acquisition of existing facilities. Others focused almost exclusively on acquisitions, seeking to accelerate the expansion of their operations.

For example, Moroccan banks have increased their presence in French-speaking Africa, mainly by acquiring existing banking groups. For example, Group Bank Central Populaire bought Bank Atlantic in 2012, and Banca Marocain de Commerce Exterior (BMCE) in 2010 became the main shareholder of the large regional group Bank of Africa (BOA), which had its headquarters in Mali since 1982, effectively absorbing it. The reduction of foreign operations of some European banks also contributed to this process: for example, Attijarivafa Bank acquired the African branches of Credit Agricole (France) in 2008, increasing the number of its ¹⁰ branches by 6.

The rapid cross-border expansion of regional bank operations in Africa was supported by increased political and macroeconomic stability and sustained economic growth in the region (averaging 5.5% per year between 2000 and 2008), ¹¹ as well as the following specific factors::

- The end of apartheid in South Africa in 1994, which allowed local banks to expand their operations to other countries; ¹²;

- increased trade ties between African countries, which prompted, in particular, banks in South Africa and Kenya to serve their customers abroad;

- the decision of Moroccan banks to establish a regional presence in sub-Saharan Africa due to limited opportunities in the domestic market and in Europe, including through the acquisition of local units of European banks leaving the market;

- The significant tightening of minimum capital requirements in Nigeria following the banking crisis in the mid-2000s motivated banks to expand their operations abroad in order to take advantage of the increased capital base;

- Ecobank International's long-standing ambition to become a leading pan-African bank, which has emerged since its establishment in the mid-1980s.;

- Some foreign banks reduce the volume of their operations in the countries of the African continent ¹³.

Two main models are used in the formation of Pan-African banks. One is traditional, when the expansion comes from the dominant head office in the country of origin. The other was created from the very beginning as a diversified network structure. There are a number of banks whose structures are a cross between these two models.

Under the traditional model, the bank's expansion proceeds from a large head office in the country of origin, which continues to play a dominant role in the group's operations. In these cases, cross-border subsidiaries account for less than 20% of total assets, and the contribution of any individual subsidiary is generally much smaller. This group includes South African and Moroccan banks and, to a lesser extent, Nigerian banks.

The second group of banks, none of which has a dominant head office in the country of origin, focuses mainly on creating their own networks. Despite the fact that a bank holding company centrally manages subsidiaries, each subsidiary bank in the country of origin is just one of many, and the largest "subsidiary" may be located in another state. An example of such a scheme is Ecobank, which is headquartered in Togo but has the largest subsidiary in Nigeria, as well as Bank of Africa (BOA), which initially had its headquarters in Mali, then the holding company moved to Luxembourg and was eventually acquired by the Moroccan Bank Marocain de Commerce . Exterior" (BMCE).

So, starting with relatively modest operations exclusively within the borders of their own countries, African banks quickly crossed these borders and are now present in several countries of the continent at once, and some of them even beyond its borders. The latter include Standard Bank Group (South Africa), United Bank for Africa (Nigeria), Ecobank Trans (Togo) and Attijarivafa Bank (Morocco).

THE TONE IS SET BY THE "BIG PLAYERS"

The oldest local bank in Africa is the first in Conti-

nente "Standard Bank Group" (South Africa) with assets of $153 billion. It was founded more than 150 years ago, in 1862, in Cape Town and is headquartered in Johannesburg. The first foreign branches of the bank were opened in Mozambique, Kenya and Namibia at the beginning of the last century, which allows us to consider it a "pioneer" of pan-African banking. The beginning of the broad expansion of Standard Bank Group in the countries of the African continent, and then beyond, dates back to the 1990s.

Now this banking group has more than a thousand branches (about 70 thousand employees) in 36 countries, including 20 African and 16 foreign countries, including Brazil, Argentina, Russia and China.

The main shareholders of Standard Bank Group are the Commercial and Industrial Bank of China (TPBC) (1st place in the world bank rating for the last 3 years, 25% of the group's shares), South African Public Investment Corporation (15%) and Tutuwa (6%). Over the past decade, Standard Bank has been repeatedly recognized as the best bank of the year in sub-Saharan Africa in various categories. Thus, in 2015, it was declared the best bank in the "Frontier Financial Markets" category by Global Finance magazine ¹⁴.

United Bank for Africa (UBA)-one of the oldest banks in Nigeria traces its history back to 1948, when the British-French Bank (BSE) started its business in this country. Today, it is the largest bank in Tropical Africa and one of the continent's leading financial institutions, with its headquarters in Lagos. The Bank serves more than 7 million customers through 750 branches in 19 African countries. It also has offices in New York, London and Paris. The number of employees is about 13 thousand, the amount of assets in 2014 exceeded $14 billion.

Following its merger in 2005 with Nigeria's Continental Trust Bank and Standard Trust Bank (which has a branch in Ghana) and subsequent takeover in 2006 by Trade Bank, YUBA is rapidly expanding its presence in Africa. Thus, in 2007, the bank opened its first branch in Cameroon, and in 2008 it received a banking license in Benin, Burkina Faso, Cote d'Ivoire, Liberia, Sierra Leone and Uganda.

In 2010-2011, YUBA expanded its operations in Chad, Gabon, Guinea, Senegal, Kenya, Tanzania, Zambia, DRC, Mali, Mozambique and the Republic of the Congo. The bank has ambitious plans to cover financial services in Africa not only in sub-Saharan Africa, but also in the Maghreb ¹⁵.

Ecobank International Group (registered in Togo) was established in 1985 on the initiative of the Federation of West African Chambers of Commerce and Industry with financial support from ECOWAS. The first branch was opened in 1988 in Lomo (Togo). Today, the group has more than 1,300 branches in 36 African countries. In terms of the number of member countries, it is the largest regional banking group in Africa, and in terms of the scale of operations, it is the leading group in the franca and ECOWAS countries (the amount of assets in 2014 exceeded $24 billion, the number of clients - more than 10 million, the staff - about 20 thousand).

Ecobank operates not only in West and Central Africa, but also in the eastern and southern parts of the continent. In particular, in 2008 the bank started its operations in Uganda, Kenya and Tanzania, in 2009 it signed a strategic agreement with one of the four largest banks in South Africa "Nadbank", in 2010 it signed a cooperation agreement with the South African insurance company "Old Mutual", as well as with the Bank of China. Ecobank has representative offices in Paris, London, Johannesburg, Dubai (UAE) and Beijing.

The main shareholders of Ecobank Transneshnl are Nadbank (40%), National Bank of Qatar (16.9%), South African Public Investment Corporation (13.9%) and others. ¹⁶

In North Africa, Attijarivafa Bank (AVB), a banking group based in Morocco, stands out for its active cross-border activities. It was formed in 2004 after the merger of the country's oldest bank, Vafabank (founded in 1904), and the Commercial Bank of Morocco.

Now it is the largest bank in Morocco (along with Group Bank Populaire), as well as the leading banking and financial group in the Maghreb countries; it is one of the top 10 largest banks on the continent. Total assets - $40 billion, branches-more than 3.3 thousand, number of clients-4.6 million, staff - about 15 thousand (2014 data).

AVB operates in 23 countries, including 13 in Africa and 6 in Western Europe-France, Belgium, Germany, the Netherlands, Italy and Spain. It also has offices in London, Abu Dhabi, Dubai, Shanghai and Tripoli. In 2008, an agreement was signed with the French Credit Agricole to buy out 5 banks in the West African countries - Congo, Ivory Coast, Cameroon, Gabon and Senegal - in exchange for expanding Credit Agricole's participation in AVB's subsidiaries Wafa Assurance and Wafasalaf. Main shareholders of Attijarivafa Bank -

SNI GROUPE (47%), MCMA-MAMDA (8%), Wafa Assurance (7%) и Santander Group (5%)¹⁷.

"AFRICAN SPECIFICS" OF BANKING

The activities of regional banks bring significant benefits to the countries of the continent where they operate. The growing number of African market participants has a positive impact on the development of the financial sector in Africa. The emergence of pan-African banks has increased competition in the banking sector and its efficiency, bringing with it innovative products such as mobile banking, etc., which has helped to increase the availability of banking services.

The staff of regional banks, as a rule, is well versed in the specifics of doing business in Africa, which allows them to quickly expand their presence in different countries of the continent. The resulting increase in the size of the financial market contributes to improving the efficiency of the entire banking sector, as well as promotes the development of financial integration.¹⁸ This indicates the growing level of internationalization of African banking structures and their desire to become subjects of the global financial market19.

Combining the advantages of foreign banks using new technologies, high-quality management and competition promotion, combined with local knowledge of local conditions, gives regional banking organizations more favorable opportunities than foreign ones in solving the continent's many and complex economic problems, including the problem of huge unmet demand for financial services.

For a long time, poor infrastructure and a limited banking network have hindered the access of the African population to banking services, especially in remote and hard-to-reach rural areas. Today, regional banks are actively investing in the development of banking. This includes both the opening of new branches and the introduction of innovative banking technologies (for example, ATMs, mobile banking, etc.) aimed at increasing public access to financial services.

South African banks, in particular Standard Bank, in addition to the introduction of mobile banking, widely use such innovations as POS terminals*, ATMs, low-cost Mzansi accounts**, which allows an increasing number of relatively low-income people, especially in remote rural areas, to access financial services. Moroccan banks are expanding microfinance operations in French-speaking West African countries, and their subsidiaries are paying a lot of attention to lending to small and medium-sized businesses. Nigerian banks have played a crucial role in increasing the number of branches in West African countries, especially in their rural areas.²⁰

Pan-African banks can help host countries improve their financial standards. Typically, banks from more developed African countries apply more stringent standards to their subsidiaries, and host country authorities are subject to improved regulatory and supervisory practices, including capital standards recommended by the Basel Committee on Banking Supervision. ²¹

However, since regional banks are increasingly interconnected across the financial systems of different countries, and the supervisory capacity of most African countries is limited and lacks resources, proper international banking supervision is likely to be required.²² This is the only way to counteract possible risks in the event of problems in the financial sector of a country where regional banks operate.

According to the IMF staff, "... to ensure sustained gains from pan-African cross-border banking networks, the pan-African banking phenomenon must include improved consolidated supervision supported by enhanced cross-border cooperation. " ²³

MERGERS AND ACQUISITIONS

In recent years, Pan-African banks have not only demonstrated rapid growth in their activity, but also decisively, sometimes even aggressively, enter the regional markets for bank mergers and acquisitions. In particular, they acquire controlling stakes in large local banks in various countries of the continent, and sometimes abroad. The most active banks are Standard Bank, Ecobank and Moroccan AVB.

* POS-terminal - a mobile payment terminal for payment of goods and services by bank card (approx. author's note).

** The Mzansi account is a specially designed entry-level account designed for performing basic operations using a bank card (author's note).

In 2007, Standard Bank acquired a majority stake in IBTK Bank, a major investment bank in Nigeria, which provided it with a significant presence in the Nigerian banking market. In the same year, Standard Bank took control (60% of shares) of KFK Bank (Kenya), combining it with its local branch Stanbik Bank, and even earlier bought a large Commercial bank of Uganda (after its first unsuccessful privatization and subsequent nationalization), renaming it Stanbik. Bank (Uganda)".

Similarly, in 2001, Standard Bank acquired the Commercial Bank of Malawi, which was renamed Stanbik Bank (Malawi). In 2014, Standard Bank entered the French-speaking West African banking market for the first time by opening its representative office in Abidjan, Ivory Coast. Among the countries outside the African continent where the South African Standard Bank has recently expanded its presence are Argentina (2006), Turkey (2007)and Russia (2009)^.24

One of the most notable developments in the regional banking market in recent years was the acquisition by Ecobank Group of a controlling stake in a number of large local banks in different countries of the continent. So, in 2011 it was the Nigerian bank "Oceanik Bank International" (100%) and the bank of Ghana " Trust Bank "(100%), in 2010 - the bank of Zimbabwe "Premier Finance Group Ltd" (70%), in 2008-the Kenyan bank "ABS Bank" (75% Bank of Malawi "Loita Investments Bank" (73%), in 2007 - the International Bank of the Central African Republic (75%) and the Rwandan Bank for Trade, Development and Industry (90%). Ecobank is traditionally active in the countries of West and Central Africa. According to its representative, "... the African banking landscape is changing, and only banks with a pan-African reach will remain competitive. " ²⁵

The Moroccan Attijarivafa Bank (AVB) is also not far behind Ecobank Transneshnl. In 2007, it rapidly entered the Senegalese banking market by acquiring majority stakes in Attijari Senegal and ALLAO (the leading bank in Senegal and the second largest bank in the West African Economic and Monetary Union (UEMOA) (79.5%).

In 2008, AVB became the majority owner (51%) of the second-largest Malian bank BIM. Similarly, AVB acquired a substantial equity interest in Gabon's third-largest bank, Union Gabonaise de Banca, and in Cameroon's SKB Cameroon. The Moroccan bank considers Ecobank and United Bank for Africa to be its main competitors in the African M & A banking market26. The M & A process can undoubtedly ensure faster entry of new regional structures into the banking market, as well as their further development. In the coming years, the process of mergers and acquisitions in the African banking sector is likely to gain momentum, which will accelerate the formation and expansion of regional banking markets.

According to many analysts, the increased expansion of large African banks and banking groups in different countries of the continent may lead and is already leading to increased competition for the most attractive banking markets with leading Western multinational banks (TNBS), which still occupy a fairly strong position in Africa. However, while regional banking groups are significantly smaller in terms of assets than the leading Western TNBS, the scale of their operations in Africa (number of branches and geographical coverage)is still very small. they are superior to them.

* * *

Thus, the modern banking landscape of African countries is characterized by the formation of their own financial institutions on the continent, which, by establishing a network of branches not only in African countries, but also abroad, as well as activating the process of mergers and acquisitions, expand their activities in the global financial market. According to experts of the well-known consulting and auditing network PwC (authors of the report "Prospects for Investing in the banking sector in sub-Saharan Africa"),"...Tropical Africa, once considered a hopeless and too risky region to invest in, now represents one of the fastest-growing emerging banking markets in the world and the most attractive in terms of capital application. " ²⁷

Given the acute shortage of domestic financial resources for the economic development of African countries, regional banking structures bear the main burden in stimulating investment processes. Therefore, according to a number of analysts, the successful development of these structures requires the development and adoption by national and regional supervisors of measures to regulate (even contain) the expansion of Western TNBS in Africa and protect emerging African banking markets from competition.²⁸

^{Beck Th. & Cull R.} 1 Banking in Africa. World Bank, Wash., 2013, p. 8; Finance & Development. IMF. Wash., June 2006, p. 44-47.

^{Beck Th. & Cull R.} 2 Op. cit., p. 8; The Global Findex Database 2014. Measuring Financial Inclusion around the World. World Bank, Wash., 2015, p. 11.

³ Africa Renewal, N.Y., August 2015, p. 24.

⁴ Sub-Saharan Regional Snapshot 2011. MIX and GGAP. Wash., 2012, p. 4.

^{Matveeva N. F.} 5 Sotovaya svyaz v Afrika: a case of Kenya // Aziya i Afrika segodnya, N 1, 2014, pp. 45-48 (Matveeva N. F. 2014. Mobile communication in Africa: a case of Kenya // Aziya i Afrika segodnya, N 1) (in Russian)

⁶ The Global Findex Database 2014.., p. 4, 12; Finance & Development. IMF. Wash., September 2012, p. 43.

⁷ Pan-African Banks. Opportunities and challenges for cross-border oversight. IMF. Wash., 2015, p. 5-6.

⁸ Ibid., p. 1.

⁹ Finance & Development. IMF. Wash., June 2015, p. 34.

¹⁰ Pan-African Banks.., p. 21-22.

^Abramova O., Fituni L. L. Ekonomicheskaya predlozhatel'nost' i investitsionnyi potentsial regiona Afrika k sub-ot Sakhary [Economic attractiveness and investment potential of the sub-Saharan Africa region]. Problemy sovremennoy ekonomiki, 2015, No. 3, pp. 167-173 (Abramova I. O., Fituni L. L., 2015.Africa south of Sahara ' investment potential // Problemy sovremennoy ekonomiki. N 3) (in Russian); Fituni L. L. Economy of Africa: Challenges of Post-crisis Development. 2 / / Asia and Africa today, 2010, N 9, pp. 8-14 (Fituni L. L. 2010. Africa economy... / / Aziya i Afrika segodnya. N 9) (in Russian)

^{Arkhangelsk A. A.} 12 South Africa-20 years later: results, conclusions, prospects / / Asia and Africa today, 2014, N 4, p. 10-15 (Arkhangelsk A. A. 2014. South Africa after 20 years to go... / / Aziya i Afrika segodnya. N 4) (in Russian)

¹³ Finance & Development. IMF. Wash., June 2015, p. 34.

¹⁴ www.standardbank.com; Pan-African Banks.., p. 88-89.

¹⁵ www.ubagroup.com; Pan-African Banks.., p. 87-88.

¹⁶ www.ecobank.com

¹⁷ www.attijariwafabank.com; Pan-African Banks.., p. 84-86.

¹⁸ Pan-African Banks.., p. 55.

^{Pavlov V. V.} 19, Klishin V. V. The New BRICS Development Bank: problems of creation and prospects of activity // Asia and Africa today. 2014, No. 9, pp. 27-30 (Pavlov V. V., Klishin V. V. 2014. New Development Bank BRICS (NDB BRICS)... // Aziya i Afrika segodnya. N 9) (in Russian)

²⁰ Pan-African Banks...

²¹ Ibid., p. 35-36.

²² Ibid., p. 35.

²³ Finance & Development. IMF. Wash., June 2015, p. 36.

²⁴ www.standardbank.com

²⁵ Into Africa: Investment Prospects in the Sub-Saharan Banking Sector. L., 2009, p. 11, 12.

²⁶ www.attijariwafabank.com

²⁷ Into Africa: Investment Prospects in the Sub-Saharan Banking Sector, p. 13; Roshchin G. E. Africa as an investment object: the interest of foreign entrepreneurs in it is steadily growing. 2015, No. 4, pp. 18-21.

²⁸ Pioneers on the Frontier: Sub-Saharan Africa's Multinational Corporations. A Report by the Initiative for Global Development (IGD) and Dalberg Global Development Advisors. Wash., 2011.

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