To help clients understand the risks they face in entrusting their cash to African banks, IQbusiness has developed a comparative rating scale model using internationally recognised methodologies.
AFRICAN BANK RATING SCALE MODEL
Corporates and individuals operating in Sub-Saharan Africa, making use of local banks to manage their surplus cash, face significant risks as a result of the potential default of their banks and the subsequent likely loss of funds. This is exacerbated in certain countries where restrictions of capital outflows prevent clients from repatriating their funds, meaning they have to hold larger balances with these banks than prudent treasury management would usually allow.
The model, paired with detailed research into both the country and the banks being assessed, gives clients a good understanding of the creditworthiness of their banks. Various factors, including macro-economic, sovereign governance, prudence and wealth, are incorporated, together with regulatory and legislative constraints, and detailed financials, ownership and political exposure of the individual banks, to obtain a holistic understanding of the level of risk faced.
The model has so far been applied to 18 banks across two African countries, but can be applied to any entity for which financial results are available.
Angola Credit Report and Research (September 2016)
The report provides the results of the research conducted, firstly, on the country of Angola, and secondly on a given list of banks in Angola. It also provides the results of the credit analysis performed on the banks.
Nigeria Credit Report and Research (September 2016)
The report provides the results of the research conducted, firstly, on the country of Nigeria, and secondly on a given list of banks in Nigeria. It also provides the results of the credit analysis performed on the banks. The research report would cover:
- Separate country profiles: Providing three levels of information:
- An overview of general indicators, such as GDP and the like, the ease of doing business, instances of terrorism, corruption, political stability, the global competitiveness index, international credit ratings and other measures.
- Indicators and information on the financial sector, such as financial inclusion, financial development, z-scores, banking restrictions, tax treaties, trade agreements and other factors.
- Information referring to the central bank itself, which includes indicators of the level of support it provides and regulation of the banks’ operations.
- Bank profiles: The bank profiles and ratings would provide components of research, and a summary of the model.
The purpose of this report is to provide a comprehensive overview of the research elements incorporated into the model, as well as a summative view of the model, financial and sovereign inputs.