BANKS: European lenders join forces to target Africa

Three European lenders have pooled stakes in sub-Saharan African banks to create a $660 million investment company that will be called Arise.

Investments in financial service providers in more than 20 African countries have been combined by Norfund, a Norwegian development body, Dutch lender Rabobank and FMO, a private development bank based in the Netherlands. The countries include Kenya, Tanzania and Zambia.

From January 2017 Arise plans to allocate capital for investment in banks that serve retail and small and medium-sized business clients in eastern and southern parts of the continent.

Africa’s banking sector is undergoing a fintech revolution, driven by mobile payment systems such as Kenya’s M-Pesa, which gives millions of new customers access to financial services.

However, a broad economic slowdown and fall in overseas investment have hampered progress. The continent was once lauded as the best source of growth in emerging markets, but the “Africa rising” narrative has suffered a blow in the past two years, as prices of oil and other commodities exported by many economies have fallen.

The International Monetary Fund expects sub-Saharan gross domestic product growth of just 1.6 per cent this year, which would mean the first fall in income per head for more than two decades.

Nigeria, the most populous nation, is expected to undergo a 1.8 per cent economic contraction this year – driven by falling oil prices, terrorist attacks and the government’s struggles to prop up its currency, the naira.

However, Nanno Kleiterp, FMO chief executive, said the reduction in commodity prices had not resulted in problems for all 49 sub-Saharan countries. “For some it has had a positive effect,” he said.

“The growth prospects in countries in east Africa are positive and we take a long-term view that this is a good moment to step in and join forces.”

Portual’s Banco Montepio is expected to join the partnership in the near future.

The aim is for Arise to have $1billion in assets invested in financial companies and to expand into west Africa eventually.

Berry Marttin, board member of Rabobank, said the long-term forecasts were compelling. “The population growth projections mean there is upside potential,” he said.

“We have a focus on food production, and local banks provide access to finance for farmers, which will support that development.”

Sub-Saharan Africa is the world’s most food-insecure region, with almost a quarter of the population undernourished, according to the UN’s Food and Agriculture Organization.

Rabo Development holds minority stakes in five banks: NMB, Tanzania’s largest; Zambia’s Zanaco;BPR in Rwanda; BTM in Mozambique; and Uganda’s DFCU.