Foreign Banks compete for control in East Africa’s lucrative retail banking market

• International banks are increasingly shifting their focus towards the retail market in East Africa, aiming to boost revenues and defend market share.
• Kenya’s Kenya Commercial Bank and Equity Bank have experienced a combined increase in value to nearly Ksh1 trillion ($7.3 billion) in the retail market.
• Banks are eyeing Africa’s mass market as the next major growth area, according to a McKinsey & Company report. 

The retail market in East Africa has been dubbed the new frontier for money-making by lenders looking to boost revenues and defend market share, and as a result, foreign banks have been brought into the conflict for control of the industry.

Foreign multinational banking behemoths that traditionally thrived on doing business with huge corporations and high-net-worth individuals are progressively changing their operating methods to benefit the hitherto ignored and neglected small enterprises and individual consumers.

Due to growing client bases and loan books, Kenya’s Kenya Commercial Bank and Equity Bank saw their combined value increase to almost Ksh1 trillion ($7.3 billion) in this market, as seen in The East African, a news publication centered around news in East Africa.

‘High volume, poor margin’ activities aimed at the low-income portion of the population are the strategy that has increased non-funded earnings for local banks.

According to a 2018 McKinsey&Company report, banks in Africa’s mass market would be their next major development area.

However, according to a research titled “Roaring to Life: Growth and Innovation in African retail banking,” how quickly retail banking penetration rises in Africa over the coming years will rely on how daring banks are in innovating. According to the report, the middle segments, which are those with yearly incomes between $6,000 and $36,000, would account for 70% of the expansion in Africa’s retail banking revenue pools through 2025.

Nigeria’s Access Bank Plc and Egypt’s Commercial International Bank are two other international competitors eyeing the local retail banking industry.

The CEO of Equity Group, James Mwangi, predicted last year that while the new generation of banks may focus more on transactions, inclusive mass banking will be the key to their success.

“Mass banks will provide inclusive services, with proper customer segmentation and delivering specific services to these segments rather than focusing exclusively on a niche within a segment,” he said.

In 2020, after purchasing Kenya’s Transnational Bank with an eye toward the region’s retail market, Access Bank Plc, Nigeria’s largest retail bank doubled its stake in its Rwandan affiliate.

On the other side, Commercial International Bank (CIB), Egypt’s largest private sector bank by assets, entirely bought Kenyan Mayfair Bank in 2020, marking the continent’s first takeover. CIB saw the merger as a stepping stone to the rest of Africa, particularly East Africa.