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Financial sector

Aspiring to be a continental beacon

by Horatius Egua


Credit cards matter to retailers and their customers  – shopping for electronic goods in Accra.

Credit cards matter to retailers and their customers – shopping for electronic goods in Accra.

Ecobank was started as a private-sector bank in West Africa with the mission of driving the region’s economic development. This financial institution has grown spectacularly and has a commercial presence in 33 African countries today.
"Where there is no strong domestic financial system, wealth generated from commodity exports will never trickle down."

The Ecobank Transnational Incorporated (ETI) has great ambitions. "Our vision is to build a world class pan-African Bank and contribute to the economic development and financial intergration of Africa," the management stated in the nine-months report it published in September 2012.

In 1985, a private-sector initiative led by the Federation of West African Chambers of Commerce and Industry established Ecobank. The initiative enjoyed some support from the Economic Community of West African States (ECOWAS). All involved understood that the region needed a stronger banking system.

In the early 1980s, West Africa’s financial sector was dominated by foreign and state-owned banks. There were hardly any commercial banks in the region that were owned and managed by African private-sector shareholders. As a consequence, most people did not have access to financial services and local-level entrepreneurs could not get loans for investment purposes. Small and medium sized enterprises struggled to get access to banks at all, and financial services were plainly out of reach for ordinary farmers, owners of micro-businesses and often even for middle-class consumers.

Ecobank’s founders wanted to fill the gap in order to promote economic development in West Africa. They understood the need to mobilise capital in a region to promote growth in that region. A strong West African private-sector bank, the argument went, would serve economic independence.

The proponents of Ecobank raised capital for feasibility studies and started various promotional activities. Full banking operations started in 1986. Ecobank is a universal bank. In Nigeria, for instance, it provides wholesale, retail, corporate, investment and transaction banking services to customers. The product range includes credit cards as well as mortgages, commercial loans as well as investment banking.

Ecobank's growth has been spectacular. It was incorporated with an initial paid-up capital worth about $ 32 million. That amount was raised from about 1,500 individuals and institutions in West Africa. Today, the group's asset base is worth about $ 18.5 billion. In December 2011, there were more than 600,000 shareholders, some regional, others international, some individual, others institutional.

The bank employs almost 20,000 persons today. It is listed on the stock exchanges in Lagos and Accra as well as the BRVM (Bourse Régionale des Valeurs Mobilières) in Abidjan which serves the West African Economic and Monetary Union, a regional group of Francophone ECOWAS members.

Apart from South Africa, Nigeria is by far the greatest sub-Saharan economy and the most populous member of ECOWAS. According to Jubril Aku, Ecobank's managing director in Nigeria, this country accounts for more than 40 % of the group's business: "We carry out your banking transactions at any of the more than 600 Ecobank Nigeria branches across the combined network in Nigeria, making your banking more convenient and more accessible."

The Bank has expanded its reach beyond West Africa however. It presently has branch offices in all 15 ECOWAS members as well as in 18 other African countries, all the way to Zambia and Zimbabwe in the south and to Kenya and Tanzania in the East. In January 2013, Thierry Tanoh, Ecobank’s new chief executive officer announced the establishment of the latest affiliate: “We are pleased that the authorities of Equatorial Guinea have issued Ecobank with a license to operate as the fifth bank in the country and to support the development of the economy with access to financing.” Ecobank also has offices in France, Britain, the United Arab Emirates and, since December 2012, China.


Flourishing economies

African economies have had a good decade. In most countries, growth has been strong in recent years. Sebastian Mallaby recently wrote of a “breathtaking turnaround” in London’s Financial Times, pointing out that, across the continent, “gross domestic product per person has risen every year since 2000, delivering a cumulative gain of more than a third”.

Doubtless, Ecobank benefited from this trend, which was primarily driven by commodity demand from emerging markets like China, India and Brazil and the rich nations. One should note, however, that the Ecobank contributed to the positive developments too. It ensured that many people more than in the past have access to important financial services. Where there is no strong domestic financial system, wealth generated from commodity exports will never trickle down. Intermediaries are necessary to channel funds to investment-willing enterprises, to assist their daily operations and to link them to partners beyond their local base.

International development discourse mostly focussed on microfinance in the past three decades. This focus made sense because microfinance reaches out to poor people who lacked access to financial services completely. However, much more is needed for an entire economy to thrive. Microfinance schemes have high transaction costs and therefore must charge relatively high interest rates of 20 % or more. By definition, moreover, their loans are small and their operations geared to the short term.

Ecobank is engaged in microfinance, but it serves middle class consumers and industrial investors as well. Of course, Ecobank is not the only private-sector bank in Africa. It has, however, built a model that other banks strive to compete with. Ecobank set the right precedent by proving that it is possible to run a state-of-art bank for Africans by Africans.

Market competition is healthy, but it can be tough too. Not every management decision will please everybody. In Nigeria, for instance, there were hard feelings after Ecobank acquired rival Oceanic Bank. One year later, some clients of Oceanic still complained in summer 2012 that Ecobank was treating them as second-rate customers.

It is noteworthy, however, that Ecobank is striving to assume social responsibility. It claims, for example, to set aside one percent of after-tax profits for social projects. The Ecobank Foundation reports that it has supported and funded over 28 projects in Africa to the tune of over $ 600,000.

For Ecobank, the emphasis is on pan-African opportunities. CEO Tanoh states: „Our reach across Africa, and our knowledge of its people, are creating a better future for this dynamic continent. Our ultimate vision is for the Ecobank brand to be a beacon of reliability for African businesses and households alike“.

As emerging markets have recently been slowing down, the outlook for Africa is becoming worse too. The global financial crisis has not hit the continent badly yet, but that may change. Obviously, a tougher business climate will test Ecobank – but to tell by past experience, this bank should be able to whether some storms. 

Horatius Egua is a Nigerian business journalist. [email protected]