The greatest opportunities (for investors in banking and financial services industries) will lie in the mass retail segment. Less than 20% of the African population has access to formal banking facilities, which represents a huge opportunity.
Nelson Mandela once said: “It always seems impossible until it is done.” Today, Ecobank is recognised as a major financial institution across the continent but when the concept of a privately-owned independent African institution was first mooted in the 1980s, the idea was considered almost crazy.
We had a clear vision and mission from inception. Our founders did not set out to create a carbon copy of other banks - they set out on a different track. They wanted something that was pan-African from the start, inclusive to customers and be able to make a difference. We have since refined the model - we now say we want to build a world-class pan-African bank with world-class operations and services, supported by strong corporate governance, strong compliance and strong ethics.
We are now present in 32 countries. Ecobank operates as one bank, with common branding, policies, processes and technologies across our entire network - risk management, finance, operations and IT functions have all been centralised. Ecobank today employs 20,000 people from 14 nationalities in more than 1,400 branches and offices across Africa, the Middle East and Europe.
Banking is a specialised and cyclical business; financial institutions need to be strong enough to withstand external shocks but flexible enough to capitalise on the upturn when it inevitably comes. If we were to create a pan-African banking force, we realised we had to adopt a diversified business model - transforming Ecobank from what was predominately a wholesale business to a more balanced portfolio of banking activities.
Having historically been constructed along geographic lines, in 2010 we also reorganised the group into three business units: a corporate banking unit to focus on multinationals, a retail business to focus on domestic consumers and local corporate, and an investment banking - which we branded as Ecobank Capital.
Looking forward, I think the greatest opportunities will lie in the mass retail segment. Less than 20% of the African population has access to formal banking facilities, which represents a huge opportunity. We are looking to empower Africans and want to contribute to the economic development of the countries in which we operate by providing wider access to finance. This will lead to more employment and, over time, a more developed economy.
Size matters in banking as fundamentally it is a commodities business. Critical mass is essential in Africa where operating costs are very high relative to customer volumes. We shifted our strategy to build scale in key markets as scale generates economies. It enables us to hand major transactions and establishes Ecobank as a systemic player in the markets in which we operate.
We remain committed to a flexible strategy, which utilises both organic and inorganic means of growth, with the ultimate aim of being top three in each of our markets. We believe that this approach allows us to react to a market that continues to grow.
However, Africa’s fortunes are tied closely to other parts of the world and the continent will not be immune to the Eurozone crisis for example. The banking sector must also confront fresh challenges such as new regulations, high up front funding and risk costs and the need to generate shareholder returns. Ultimately, those banks which can reshape their portfolios, build stronger regional networks and innovate successfully.
The article is re-published with permission from professional services firm, Ernst & Young. The firm recently launched its 2012 Africa Attractiveness Survey.