Many Africa's lenders are promising spectacular returns as they expand
across the continent. Their ambitions have created a group of home-grown
regional powerhouses. Yet the costs of building networks of branches
and of investing in growth mean that such returns remain in the distant
future.
African banking market attracts investors because it is potentially vast and virtually untapped. However, the market's differences between banks are huge. I think international banks need to be really careful when trying to approach market in each country, and need to understand that the results will not be the same. The use of new technology and the expansion of firms are giving a big boost to domestic and regional banks that would previously have been outclassed by international rivals. The financial crisis also prompted some of the region’s banks to focus on expanding in Africa rather than going abroad. Another approach that some international banks try is helping governments to sell bonds and offering banking services to the biggest companies in each country. I think that in order for these models to be sustained, banks also have to watch out for specialist rivals. International banks should also make customer service smoother to make banks more user friendly and attract more customers.
http://www.economist.com/news/finance-and-economics/21572768-across-africa-banks-are-expanding-their-returns-arent-continent-dreams
If the banks attract more customers which means international investors than the will have more money to deal with budget deficit and other problems that the country needs to improve. These investors can help with the countries capital and raising their GDP. They have to be smart though because having too many investors decreases their interest rates causing investors to back out and there for losing money.
ReplyDeleteInvestors most likely keep pouring cash into Africa due to the chance of Africa finally taking full advantage of their vast natural resources. Due to how some African countries just need to grow just some more (in respect to how growth is exponential as seen in the graph of growth over the course of history in class), investing with them is almost like playing the lottery. There is a low chance of a payout, but the expected payout due to the massive amount of growth that would be experienced (yet again shown by the same graph from class).
ReplyDeleteI agree with your point on the natural resources. But hopefully, financial markets will grow in pace with the banking system expansion in order to have the desired economic growth of the continent.
ReplyDelete