Tech in Africa
A finding by the McKinsey Africa practice predicts that African banking revenues will drop by 23 to 33 percent from 2019 to 2021. In the same period, banks will see a 5-15% drop on Return on Investment (ROI) due to reduced margins and risks associated with rising costs. Banking revenues will return to the pre-crisis levels as witnessed after 2024.
African banks need to remain resilient during this period as the continent relies on them now more than ever. Aid money and international assistance have been transferred through the banking system. They also implement credit programs unveiled by most governments. Banking leaders should take bold action when reimagining their business models and the role society has to play. The research by McKinsey focusses on the following questions:
- How do banks manage risk and capital?
- How do banks manage costs and streamline operations
- How do banks adapt to shifts in consumer behavior
In the current climate, the report suggests short-term actions that can help the banks restart long-term initiatives and structural reforms in the sector while securing their competitiveness and sustainability.
The actions will help bolster the role of African banks play in recovery and resilience.
Role of African banks in the foreseeable future
Moving forward, African banks should focus their returns to shareholders, which plays a broad role in society. Banks are facing expectations from customers and regulators within the coming months. Find more here:
Secondly, regulators and consumers should maintain their lending on a large scale. McKinsey’s survey shows the central role played by banks in African economies. This provides a new impetus for them in the short run. The COVID-19 pandemic has speeded up existing trends that might culminate in structural reform with long-term implications.
Role of African banks and in managing risk and optimizing capital
Most banks are exposed to the risk of COVID-19. There are immediate interventions banks can take to reduce their exposure to risk, but crisis creates an opportunity for revamping the credit process.
They can adopt short term measures or long term measures depending on the situation.
You can read more on the McKinsey article here.
