In recent years some of the best performing banks in Africa have been indigenous banks that serve the small and medium enterprise community. This has been largely unanticipated by the investing community. For many large commercial banks, banking small businesses has always proved challenging, and in most surveys of small business finance. The reasons for this are clear. Not only do small businesses fail to fit into conventional categories - personal or retail, but they lack the ingredients that conventional banks look for in lending: audited financials, physical assets as collateral, leaders with respectable paper qualifications, and a separation of personal and business accounts.
Some of the best performing banks in recent years have focused on the SME market, often for no other reason than the scale of their balances sheets initially prevented them from accessing the larger corporates, and inefficient payment systems locked them out of the lucrative white collar market, as workers banked where their employer banked.
