Pan-African banks are improving competition – IMF

The IMF Director General meeting President Paul Kagame on her recent visit to Rwanda

The IMF Director General meeting President Paul Kagame on her recent visit to Rwanda

With  their  presence in around  36 countries and Rwanda  inclusive , the pan African Banks  have triggered access to  higher skills and expertise, access to capital especially for continental  trade projects as well as  diversification of resources.

For example, the emergence of eco bank   in Rwanda   increasing innovation and use of technologies in the country’s financial sector such as continental electronic payments systems, upgrade of the local payment systems something that triggers a cash lite economy.

“These banks are driving innovation, enhancing financial inclusion, and in some cases have contributed to lower costs,” a report by IMF stated

A renewed impetus for regional integration, coupled with the success of mobile payments in Kenya was propitious to the expansion of Kenyan banks in east Africa.

Indeed   business community  believe  establishment  of pan African bank as well as regional  banks  may  facilitate  financing  bigger  projects  that would  be able to  be financed by   local banks.

“We need more of these banks which can  pool  resources from  different countries to  help  finance  projects  that  would  not be accepted by  local  banks,” Denis Karera,  proprietor of  Kigali Heights  project earlier said.

The report says that the rise of the   continental cross border banks is a welcome development   seen to boost financial deepening and inclusion in Africa.

Moreover, the banks that are deepening to rural areas in around the continent are   likely to boost the fragile SMEs in different countries and help them access credit needed to boost production mainly in value addition for exports.

“The easing of civil conflicts, the significant improvements in macroeconomic performance, and the opportunities arising from large unbanked populations across the continent was fertile ground for the expansion,” said Charles Enoch, of the IMF’s Monetary and Capital Markets Department

Nevertheless, IMF warned that emergence of the Pan African banks would result into short falls, if no action is taken.

At the same time, the rapid cross-border expansion of these banks also raises challenges that, if left unaddressed, could pose systemic and spillover risks” said Mauro Mecagni, Assistant Director of the IMF’s African Department.

Supervisory capacity is already constrained and under-resourced in most of Africa, and the cross-border banks put additional pressure on home supervisors to ensure these groups are adequately supervised, he adds.

For example, the report says that challenges of new regulatory and supervisory, opens new channels for transmission of macro-financial risks and other spillovers across home and host countries.

Moreover, the lack of regulatory oversight of bank holding companies and their supervision on a consolidated basis in some home jurisdictions needs to be addressed urgently, the report added

Share Button
Leave A Comment