Technology, Innovative Products to Drive SSA Financial Services Future – Report

Cytonn Investments projects that sub-Saharan Africa (SSA) financial services sector’s future growth will be driven by technology and innovation capabilities.

It’s ‘Sub Saharan Africa H1’2017 Financial Services Report’ reveals that fundamental Macro-economic drivers across SSA are trending positively – such as GDP, interest rates, inflation, exchange rate, corporate earnings, foreign investor sentiment and security & political environment.

Out of the 47 SSA countries, the report focused on Mauritius, Tanzania, Kenya, Botswana, Ghana, Nigeria, Namibia, Zambia, Rwanda and Uganda.

The report concludes that the SSA financial services sector continues to undergo transition, mainly on the regulation front, which is critical for stability and sustainability of a conducive business environment.

“With, (i) a growing population that is embracing mobile phones for financial penetration, (ii) the increased usage of technology by Financial Services firms to drive alternative channel distribution of products and enhance efficiency, and (iii) the attractive valuations, which provide an attractive entry point for long-term investors, we are positive for investors in Sub Saharan African Financial Services Sector with a long-term investment horizon,” reads the report.

Although the SSA financial sector represents an opportunity for investors, private sector capital investment into SSA has not kept pace with the level of investment required noted the report.

“Financial penetration remains low in Sub-Saharan Africa, with less than a quarter of the population having access to a formal bank account, hence limiting the degree to which private individuals can access financial services, while the average insurance penetration rate in Africa is very low, at 3.5 percent. Low inclusion presents ample runway for growth, given the backdrop of increased macroeconomic stability, positive consumer-oriented reforms and financial sector deepening.”

The Kenya Commercial Bank (KCB Group) ranked the highest in the Composite Bank Ranking. Nigeria’s Zenith Bank Plc took the second position and Ghana’s Societe Generale third. Kenya’s National Bank of Kenya (NBK) came last.

In the Insurance sector,  Botswana Holdings was ranked first, Kenya Re-Insurance came second.

“Comparing the rankings of both the banks and insurance companies, we find that the list of top companies is dominated by Kenyan banks and insurance companies, along with Ghanaian banks and Mauritius and Nigerian insurance companies. This is due to Kenya’s growing financial intermediation and deep penetration of financial services penetration as compared to the rest of Sub-Saharan Africa,” part of the report reads.

“This does not, however, mean that Kenyan investors should not seek to diversify their investments by investing regionally if they find an attractive investment opportunity.,” it adds.