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Sizing retail and business banking markets in Botswana

The banking landscape in sub-Saharan Africa has been changing gradually over the last two decades.

Banks are increasingly venturing into the lower-income segments of retail and business banking. The enormous success of mobile money, with respect to the uptake and profitability of mobile money operators (MMOs), within these segments has caused banks to change their perceptions of the traditionally “unbankable” segments.

The adoption of digital technologies and alternative banking channels, such as agency banking, has enabled banks to serve the lower spectrum of the market more effectively and efficiently.

With these changes, a pan-African bank operating in Botswana approached Genesis to develop a model to size the revenue pools of the retail and business banking segments of the Botswana banking sector.

The sizing of the revenue pools was to include a breakdown of the market size by income categories (income bands for retail banking and turnover bands for business banking) and sectoral categories for business banking. Moreover, the estimated revenue pools were to be projected over a five-year forecast period.

Using statistics on population demographics, population income distribution, enterprise characteristics as well as banking statistics, the Genesis team provided a current and historical view of the size of the retail and business banking segments, broken down by income and sectoral categories, from an asset/balance sheet perspective. Based on the balance sheet characteristics of the retail and business banking markets, the revenue pools of either market were size per income segment and sector.

An assessment of the economy, and the drivers of growth (e.g. government policy, financial inclusion statistics, employment opportunities, etc.) allowed the team to forecast how the income and turnover distribution would change over a period of five years. This, then, enabled the forecasting of the revenue-pool sizes at an income segment and sector level.

The Genesis team also estimated the market share of various players, including the client banking, in each of the income segments and sectors reviewed in the revenue-pool analysis. This was largely informed by a mystery shopping exercise conducted by the team.

The results of the analysis carried out in this assignment enabled the bank to have a good view of the gaps and opportunities that lay in the retail and business banking sub-sectors. The analysis also enabled the bank to be more aware of its position in specific market sub-segments and develop strategies on how to grow its business in the market sub-segments that presented the greatest opportunity.

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