Credit Risk or Fraud: What Are Top 5 Concerns of Sub-Saharan Banks?

Middle class population in Africa has tripled since 1972 and has now reached 34% of the content’s population (data by “The Middle of the Pyramid: Dynamics of the Middle Class in Africa“ report by African Development Bank). In response to this trend, financial services companies are expanding and increasing in complexity. Growth means changes. Changes bring risks.

High dependence on technology, fraud, competition from new entrants, credit risk and risk management quality are the top five risks perceived as most severe by Eastern African banks according to PricewaterhouseCoopers research “Spotlight on financial services 2011 Risk Survey”.

Technology dependence risk is topping this list: the concern is caused by possible shortage on technological capabilities as well as on skilled human resources. Analysis of risks faced by banks allows us to focus on trends in Sub-Saharan African financial industry for 2012. Competition results in reduced margins for banks and the need to improve customer service. Banks will tend to relax their credit approval and appraisal procedures, thereby increasing risk.

Having recently set up a Sub-Saharan office in Nairobi, Scorto is committed to empower growth of companies in financial sector in Sub-Saharan Africa responding to their concerns. We have learned to address the causes, rather than the symptoms, of any problem. Following steps will help banks mitigate risks outlined above:

  1. Embed risk culture throughout the organization. This implies defining set of rules according to your risk appetite, establishing a consistent business process and applying certain tools.
  2. Balance risk exposure using in-house credit scorecards.
  3. Reach out to unbanked and under-banked customers offering mobile and online banking services.
  4. Generate customer loyalty based on their behavior insight.
  5. Select software that will easily integrate with core system and other solutions and that will support moving to the cloud.
  6. Eliminate vendor dependence by training on-site staff to adjust software solution as your strategy evolves.
  7. Use data mining tools to detect and prevent fraud.

The problems discussed in this post are certainly just a part of global landscape. For instance: according to recent survey by National Association of Credit Management, dominating concern of the US credit professionals for year 2012 is "Lingering uncertainties about the still sluggish economic recovery" (28.23%). What are your top concerns for the nearest future and how have you prepared to face them? E-mail your feedback at

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