The financial services sector in Africa is playing a critical supportive role in the continent’s development as a result of increased consumer spend, public and private sector investment in infrastructure, advances in technology leading to greater connectivity and increasing demand for natural resources by the developing Brazil, Russia, India and China bloc of countries, financial services firm KPMG Africa said on Thursday.

Other factors playing a role include increasing urbanisation across the continent, a greater number of enablers such as the increasing acceptance of the rule of law and the harmonisation of regulatory requirements at national and regional levels.

“In Nigeria, for example, regulatory reform led by the Central Bank has led to consolidation in the banking sector,” said KPMG Nigeria management consulting head Bisi Lamikanra.

“This has led to more focus on retail banking. Further developments have derisked local and foreign investors entering African markets,” she added.

Different models are also being developed for different financial services being offered in different regions. Globally, there has been a move from deregulation to greater regulation.

Junior Ngulube, CEO of Munich Reinsurance Company of Africa, added that the South African banking and insurance sectors have been very well-regulated. “We didn’t see any of the turmoil that is still playing out globally. The rest of the continent is also very similar to South Africa in that respect.

“In Francophone countries, for example, there is just one [insurance] code and one currency. That makes it easy to transact business,” he said.

Although investors should guard against assuming that all markets on the continent are the same, further risk for investors can be reduced through combined expertise.

Citibank Africa COO Nicholas Young suggested because Africa was an enigma for many investors, a tailored approach should be developed for each market. “Combined global and local partnerships work well to unpick different markets.”

Such an approach can act as a key differentiator for investors entering Africa.

Increased connectivity, in Citibank’s experience, has illustrated that national Central Bank debates around policy issues have started to converge around common policy concerns across the continent, said Young.

Lamikanra said foreign investors needed to invest now in their learning’s around how to operate in Africa and also recognise the need to continue to refine their understanding of how to operate within African markets and the role of financial services in the development of Africa.