Moustapha Sow is a Senegalese financier who firmly believes that Africa should be built by Africans while acknowledging the need for external contributions. According to him, doing business in Africa is challenging. “Sometimes, I’m forced to put a white person forward to make progress,” he admits. He emphasizes the need to change perceptions: “For the same services, they’re willing to pay three times more abroad. Let’s not get discouraged. Let’s follow Mandela’s work. We’re living in a crucial moment. Change will come.” The company he founded in 2017, SF Capital, initially focused on investment and financing banking with only 2 to 3 employees. Today, it employs around a hundred people and supports financial institutions and states. Since its creation, SF Capital has raised between 1 and 1.5 billion euros for African institutions by collaborating with foreign banks based in London specializing in trade finance. SF Capital is part of a group that includes Microsen, a microfinance institution with pan-African ambitions. Moustapha Sow discusses the reasons behind the withdrawal of Western banks.
What are the reasons for the departure of Western banks?
Before answering this question, let me take you back to history. By observing the historical segmentation of Africa into linguistic zones, we can see that the presence of banks depended on the origin of the colonizing countries: Barclays and Standard Chartered in English-speaking countries, Société Générale, and BNP Paribas in French-speaking countries. These banks were there to serve their clients, mainly multinationals from their countries, which dominated African economies. However, the economic structure of African countries has changed. The industrial and logistical conglomerates from Northern countries have declined in Africa, and consequently, the presence of Western banks lost one of its primary reasons for being in Africa. The first major withdrawals began with Barclays in 2007, followed by Standard Chartered, BNP Paribas, and Société Générale, to name the most significant.
However, I must clarify that investment and corporate banking (CIB), the most profitable and least risky branch, has not experienced any changes. This is in contrast to the retail banking sector, which has seen the emergence of African banks, notably South African, Moroccan, and Nigerian banks, as well as regional banks like UBA, Coris Bank International, and NSIA. These banks have shown a greater appetite for the retail and commercial banking segments, leading foreign banks to lose market share in this area. As a result, there is a redistribution of roles in retail banking. Foreign banks maintain an advantage in the sovereign (states) and institutional financing segments. The loss of retail banking no longer justifies their presence in Africa. Thus, they are only physically leaving Africa while remaining in other forms. For example, Dutch Bank is very active in Africa without a physical presence, using credit enhancement mechanisms such as Lloyds insurance, export insurance, and products from the Islamic Development Bank to operate in Africa while limiting its risks.
So, these foreign banks are leaving Africa without really leaving?
Indeed. Banks operate on three pillars: risk, revenue, and operational costs. Africa is perceived, rightly or wrongly, as a risky continent. In finance, perception is more important than reality. The Africa portfolio on these banks’ balance sheets is the riskiest part. In terms of revenue, banks do not need to be physically present to carry out lucrative operations. For example, Standard Chartered conducts more operations in Senegal, where it is not present, than in Côte d’Ivoire. This is due to a logic of revenue optimization, cost reduction, and risk management, which justifies their withdrawal.
To illustrate your point, can we recall the case of Standard Chartered, which sold its retail business in Côte d’Ivoire but kept the CIB division?
This follows the same logic. The retail banking segment is dominated by African banks.
What do you think about Société Générale’s announced withdrawal, which is happening at a sustained pace, in our opinion?
Société Générale is a publicly traded bank whose goal is to achieve results. If its presence in Senegal and Africa is no longer justified according to its profitability, positioning, and compliance objectives, it withdraws to rationalize its costs and optimize its profits. The objective of any investor is to make profits beyond any sentimental attachment. Of course, there is a strategic dimension that must be implemented, which is the prerogative of public authorities or certain institutions present on the continent for commercial and influence reasons. For example, Citi was the only American bank with a strong presence in Africa. All US government financial flows to Africa pass through it. This is a strategic position. If we evaluated its intrinsic profitability, it would have left a long time ago. But there is a strategy behind it.
Citi is very active in Eurobonds, like other banks?
Yes, it is a lucrative segment but does not justify a presence in Africa. Citi and others are involved in intermediation between institutions, sovereign entities, and major African accounts with American, British, and other investors. At the moment, we are witnessing a reformulation of Corporate Investment Banking (CIB), where banks are very present in Eurobonds and debt in general.
What about the correspondent banking segment, which is still the exclusive domain of foreign banks?
Things are evolving in this area. Until very recently, only top-tier banks were authorized to confirm orders and documentary credits. However, in the last ten years, local African banks present in London and Europe have positioned themselves in this niche. The correspondent banking segment is no longer exclusively dominated by large banks but also by other institutions such as UBAF, Japanese banks, and local African banks with European or American licenses.
Your analysis of the African banking sector?
First of all, I would say that the best way to create champions is to create financial champions first. Morocco has demonstrated this with its banking conglomerates. You cannot create champions without strong banks. The African banking sector is evolving rapidly. Trends differ from country to country. For example, South African banks show limited appetite for Africa. In “Middle Africa,” pan-African banks like Ecobank Transnational Incorporated play a crucial role in changing the banking landscape. Nigerian banks, although expansive, need to revise their business models and define winning strategies for Africa. In West Africa, institutions like NSIA, Coris Bank International, or Equity Bank are experiencing explosive growth. Additionally, microfinance institutions are filling an important gap by reaching out to an unbanked population that is unlikely to be banked given the stringent Basel norms. The combination of microfinance and mobile banking allows for the inclusion of millions of people who now have access to basic financial and other essential services. There is room for growth in this area.
