Certain regions are undergoing a period of consolidation, such as East and West Africa, where many smaller banks are undercapitalized and lack either the systems or the competencies to manage credit, market and operational risk. Consequently, regulators are encouraging market consolidation to help mitigate these risks and promote stability — which may ultimately result in a few large banks dominating the region, with a significant volume of deals to purchase smaller banks.
"You can’t paint Africa with one brush neither can you import a foreign business model or product without local adaptation. To succeed in Africa, investors need to create unique solutions based on local needs leveraging technology to achieve scale and long term profitability." -Dapo Okubadejo, Partner, Deal Advisory Financial Services, KPMG in Nigeria
Inadequate banking infrastructure, low banking penetration and young, tech-savvy millennial populations have paved the way for fintech and telecom companies to revolutionize Africa’s financial services. Enabled by telecoms, mobile money accounts have had a dramatic impact on financial inclusion. But this doesn’t mean that banks are out of the picture; they’re now beginning to edge their way into fintech by building partnerships with telecoms. We expect such partnerships to drive M&A activity in the region and create significant interest from both strategic and financial investors.