Alexandra Born and Paul Mathieu
Africa-based banks, once largely domestic, are expanding across the continent and now dominate the banking sector in many countries. These so-called pan-African banks are establishing cross-border networks and overtaking the European and U.S. banks, which traditionally dominated banking on the continent. The new pan-African players are driving the expansion of financial services and economic integration in Africa, helping unlock the huge potential of a fast-growing region.
Pan-African banks originate mainly in the largest economies of Africa, such as South Africa, Nigeria, and Morocco, and from countries of influence within a region, such as Kenya. But one of the major pan-African institutions, Ecobank, is headquartered in tiny Togo. Ecobank emerged in the mid-1980s in the context of the 15-nation Economic Community of West African States, and although not the largest of the pan-African banks in terms of assets, it surpasses them all in geographic reach.
At a time when global banks have moved their business away from smaller-scale and higher-risk operations, the expansion of African players bodes well for financial sector development in Africa. These regional institutions are not only filling in the gaps left by the retreating global banks but are fostering financial development and economic integration. However, to be sustainable and to avoid raising systemic risks and the type of financial instability experienced elsewhere, this expansion of banks with significant cross-border networks must be accompanied by stronger supervision and heightened cross-border cooperation.