If you are clients and agents of banks, students/fresh graduates aspiring to a banking career, «Bank in Africa: What you don't learn at school» by Nabi Issa Coulibaly is for you! In this 199-page book (currently available in French Edition only), the author himself, former director-general of UBA-Burkina, explains the deep structure of the bank and its functioning deconstructs the myths, and defines the bank of the future, the one that for him will know best how to resist and prosper in a continent in a full economic boom. So today, I offer you a summary of what I could learn by reading this book. Thanks for joining me.
I. What is a bank?
According to WAEMU's definition, the bank is any legal entity that carries out, as a usual profession, operations of receipt of funds from the public, credit operations, as well as the provision of customers and the management of means of payment.
In his book, Mr. Coulibaly gives a more common definition of the bank by saying that the bank is any company whose activities are:
- the purchase, preservation, and sale of money;
- the sale of the means of access to money, sending, receiving, and using money;
- advice on the use and fruiting of money.
The banks:
In Africa and everywhere, there are 6 types of banks, classified according to their business socialization, business environment opportunities, risk appetite, political will, etc. These are:
Commercial or retail banking;
Investment bank;
Islamic bank;
Development or investment bank,
Universal bank;
Offshore bank.
The most represented banks in Africa are the commercial, also called retail banks. These are banks that offer their products to the first direct players in the economy, such as individuals, liberal professions, associations, and SMEs. Others, also called corporates, are more turned towards individuals and large companies.
What defines a good bank?
Depending on the banks, the criteria for ranking may vary. Thus, a bank can occupy a rank according to a certain ranking criterion, and occupy a different one according to another. But we establish the bank rankings based on the total balance sheet, the net banking product, the outstanding loans to the economy, and the net profit. This is how we get this ranking of the top 25 banks in Africa (African Business Magazine 2021):
Compared to the other banks, it emerges that African banks are the 2nd fastest-growing market, the 2nd most profitable market but also the 2nd most risky market with an average cost of risk estimated at 1.8% against less than 1% everywhere else except in Latin America and the Caribbean where it is higher than 2.5%.
II. Understand the bank.
To function properly, the bank needs its customers as much as the customers need the bank. Their sources of income come from the loans granted to clients, gravitational services, advice, and investments.
Risk: Customers must know the 'risk' notion in order to have a better understanding of the requirements of banks and therefore better adapt themselves and succeed with their banks. In the banking case, the risk is any event the occurrence of which generates losses for the institution. We divided it into 3 categories:
Credit risk: all losses related to the non-repayment of the credit
Operational risk: all losses related to the failure in the operation, the internal control process, or that may be related to external events at the bank.
Market risk: all events that can lead to a loss of values of the active elements or an increase in the passive elements of the bank.
Also, note that all banks rely on the central bank. Banks are like the customers of the central bank. For the XAF monetary region states, the central bank is the 'BCEA' whose central headquarter is in Yaoundé (Cameroon).
For those from the XOF region, it is the 'BCEAO' located in Dakar (Senegal). Many other countries, such as Guinea (Conakry), South Africa, Ghana, and Nigeria, have their own currency and, therefore, their own central bank. In short, the role of a central bank is to ensure the regulation, supervision, clearing, and financing of local banks. It is also the gateway between local banks and international banks in the framework of financial money relations and trade operations.
How do I choose a bank?
To properly choose his bank, the client must consider several criteria that are:
Accessibility (physical, digital, price..);
The quality of the service offered;
The proprietaries;
Ethical accounting;
Relational proximity;
Strength.
It is also important to remember that the more accounts you have in different banks, the more you will have to pay fees (card fees, account maintenance fees, etc.). In this, the author advises everyone to limit themselves to two banks to begin with. Because in case of unforeseen with one, you can count on the other. And if this is necessary later, you can turn to a third bank.
III. The bank of the future.
To survive, the banking sector must constantly renew itself and adapt to the needs of the moment. This will require digitalization and digital products and good risk management and compliance with customer needs. As Muhammad Yunus said,
“In the future, the question will not be, 'Are people credit-worthy', but rather, 'Are banks people worthy?”
The digitalization of banking will lead to changes in the banking sector, but this does not mean that traditional banking will disappear. The two will coexist for a long time before we switch significantly to digital banking.
Looking at the prospects, soon, the volume of direct recruitment in the banking sector will be low, partly related to digitalization and limited expansion. The opportunities will lie more with decentralized financial systems and independent partners of banks. That said, future job opportunities in the sector will be found in these three particular areas:
Sales: Banks are increasingly in need of direct or indirect employees who know how to sell. They rely more on partnerships with service providers to sell their products. Sectors such as the decentralized financial system will also develop. They will also need these salespeople to easily access customers.
Risk management: Given the opportunities for economic development, banks will innovate to respond to them. But by innovating, risks will arise and you have to know how to manage them. Everyone who is going to specialize in managing these risks will have job opportunities.
Technology: Banks will need people within them or through Fin Tech1 who are proficient in technology to develop applications.
Sources:
As the author said, the book could have been titled «Bank in Africa. What you need to know to save your money». The bank and its customers are called to collaborate, and it is important for each part to better understand the other so that everyone can reap the benefits. I hope you found it useful. Thank you for reading. May God bless you, take care.
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