In the early aftermath of colonization, Africa found itself under the sway of multinational and European banks. State-owned banks emerged to address mass banking needs, yet they often carried political agendas. Amidst this landscape, a burgeoning group of customers – primarily migrants who had established businesses in these countries – sought a bank that valued them and understood their unique requirements.
The dominant foreign banks focused on large corporate clients, while state-owned banks navigated political currents. However, there was a noticeable gap, and this gave rise to a new wave in the financial sector. Influential business owners began contemplating entry into the banking arena, seeking control over financial transactions within their supply chains. With transactions being costly, the prospect of establishing lucrative margins in the lending business became apparent.
Driven by both financial opportunities and the prestige associated with banking, conglomerates started eyeing expansion into the sector. The social and achievement needs of business owners played a role, with banking being viewed as a prestigious venture offering networking prospects. These banks strategically targeted the business segment, with some focusing on specific communities, such as the Asian diaspora who had migrated to Africa and established their enterprises.
This trend paved the way for the evolution of business banking as a Strategic Business Unit (SBU) within these emerging banks. The promoters of these banks possessed intimate knowledge of the business communities they served – understanding their struggles, successes, and often their net worth and assets. Many business owners had supply chain or supply credit relationships with larger conglomerates, leading these conglomerates to envision building their businesses around providing banking facilities to community entrepreneurs.
Banking at this juncture relied heavily on collateral and character, with formal credit analysis taking a back seat to prior credit experience and market information. As the global landscape changed and losses were experienced, there arose a need for more sophisticated credit analysis tools. This shift in the financial sector prompted the demand for bankers with experience in handling diverse customer segments, offering valuable insights into building and nurturing banking relationships.
As Africa's financial landscape undergoes this transformative shift, the emergence of small private banks not only fills gaps but also introduces a dynamic element that aligns with the evolving needs of diverse communities and businesses.
