Africa banks jostle for a piece of EAC’s huge trading bloc

Kenya Bankers Association head Habil Olaka (left), KBA chairman and chief executive officer of Standard Chartered Bank, Mr Richard Etemesi (centre) and KCB boss Martin Oduor-Otieno. African banks are enhancing their presence in East Africa to exploit the market when member countries integrate, creating one of Africa’s largest trading blocs. PHOTO/FILE  NATION MEDIA GROUP

In Summary

• The East African Community Common Market Protocol guarantees free movement of people, goods, capital, and services with the bloc, moving towards creating a monetary union and eventually a political federation.
• National Bank of Kenya is preparing to go regional next year.
• Emerging oil deposits in the region and mobile penetration are also a major attraction.

African banks are enhancing their presence in East Africa to exploit the market when member countries integrate, creating one of Africa’s largest trading blocs.

Large institutions such as South African Standard Bank, Togo-based Eco Bank, and Nigeria’s United Bank of Africa are currently operational in Kenya, Uganda, and Tanzania.
The Kenya Bankers Association chief executive, Mr Habil Olaka, said this trend is prompted by the need to tap into the regional market.

“Most banks are also looking at spreading their assets so as to avoid crises in case of geographical losses in monitory value,” he said.

The East African Community Common Market Protocol guarantees free movement of people, goods, capital, and services with the bloc, moving towards creating a monetary union and eventually a political federation.

THIRD LEVEL OF INTEGRATION

A statement released by the bloc mid this year says the community has earmarked November 30 as the day for entry into the third level of integration.

“This shall be a unique opportunity for the EAC to usher in the common currency and harmonisation of the macro-economic policies of partner states,” said the Speaker of the East African Legislative Assembly, Ms Margaret Zziwa.

Kenyan banks are also looking at the wider EAC market; Equity, Kenya Commercial Bank, Commercial Bank of Africa, I&M, and Diamond Trust Bank have a regional presence.

Equity entered Uganda by taking up 100 per cent stake of Uganda Microfinance Limited at Sh1.66 billion in 2008. It currently operates in Rwanda, Tanzania, and South Sudan.

National Bank of Kenya is preparing to go regional next year.

The bank’s chief executive, Mr Munir Ahmed, announced in May that after rebranding and a proposed rights issue to be carried out in the first quarter of 2014, it would enter Tanzania, South Sudan, Uganda, and Somalia.

“We will use the additional capital of Sh10 billion the bank will seek through the rights issue to open operations in the proposed countries,” said Mr Ahmed.

UNTAPPED MARKET

He added: “We have already commenced preliminary surveys of the regional market; we see it kicking off in the next 12 months.”

It is estimated that of the 41 million Kenyans and 120 million people in East Africa, only half of the population has accounts, hence the potential.

According to Mr Kassi Ehouman, the managing director of Kenya and cluster head of East Eco Bank, most banks are moving from their countries of origin to avoid possible economic crises.

“Banks are also looking at tapping into inter-African trade. They are aggressively adopting mobile banking in a bid to spread their wings,” he said.

Experts say the main attraction towards the region’s banking market is that it is wide and largely untapped.

Possible completion of the EAC Common Market deals and lifting of the Comesa safeguards come February 2014 are just other additives that have attracted banks.

Emerging oil deposits in the region and mobile penetration are also a major attraction.