AFRICA’S financial firms can claim many innovations, from M-Pesa, a pioneering Kenyan mobile-money service, to the life insurance for people with HIV offered by All Life, a South African firm. To these can be added the first social-media bank run. Chase Bank Kenya, the country’s 11th-largest (unrelated to America’s JPMorgan Chase), was taken over by regulators in April after word of its impending collapse spread on Twitter and WhatsApp, spurring panicked withdrawals.
The run highlighted the risks facing banks in a region that is seen by many investors as one of the industry’s final frontiers. Whereas banks in many rich countries have produced disappointing profits since the financial crisis of 2008, African ones had until recently been reporting stellar growth and juicy returns. Those in Ghana were expanding their loan books at a breathtaking pace of more than 30% a year. Banks in Mozambique, Zambia and Malawi were not too far behind. And most were making good money, too.
Moody’s, a rating agency, reckons that average return on equity (a standard measure of profitability) ranged from 20-25% in many African countries, making their…Continue reading