A customer being served at a Transnational Bank branch on City Hall Way in Nairobi earlier. It has since been taken over by Nigeria’s Access Bank. FILE PHOTO | NMG The recent acquisition of Transnational Bank by Nigeria’s largest lender as ranked by assets, Access Bank, brings to three the number of Nigerian-domiciled financiers currently operating in Kenya. The other two are UBA, GTBank.
Within East Africa, the three also have operations in Uganda, Tanzania and Rwanda. It is an expansion fueled by an aggressive pan-African agenda but often in full contempt of local market terrain.
Which is why despite over 10 years of operations in the region, and in the majority of the cases, entering the markets through brownfield operations, they are yet to rise up to dominant tiers they hold in their home markets.
This boils down to two fundamental (and ruinous) differences between their home (Nigerian) market and the East African markets.
First, Nigeria is largely a big-ticket market. For quite some time, low risk appetite for retail lending have pushed Nigerian banks to focus on what they consider reliable borrowers, which are often large private conglomerates or entities/businesses in which the State holds interest(s).
Statistics from the Central Bank of Nigeria shows that in 2018, consumer loans constituted a paltry three percent of total credit to the core private sector, with the large businesses constituting the balance.
The oil and gas sector alone accounts for more than a third of outstanding commercial bank loans.
Essentially, it’s a corporate-driven market and consequently large balance sheet is a core value proposition.
On the flipside, the East African market is small-ticket segment. For instance, the share of consumer credit in Kenya stands at more than a third of total outstanding credit (and balance sheet is not a proposition).
Further, there are only few cases where large corporates have large borrowing requirements; in fact you could even count the number of cases where local corporate has drawn down more than Sh5 billion from a single commercial bank’s balance sheet, over the past decade.
Consequently, banks in East Africa region have had to build strong retail franchises for both lending and deposit mobilisation.Additionally, Kenyan banks, specifically, have exploited the full advantage of the requisite infrastructure being put in place for retail lending, namely (1) a national civil identification system that uniquely identifies every customer; (2) an exhaustive credit referencing that is able to produce powerful behavioural data, transcending negative listing […]
