Absa Group is weighing joining a payments platform that facilitates direct settlement in Chinese currency, to take advantage of growing trade with Africa’s biggest trading partner.
The lender plans to integrate with China’s Cross-Border Interbank Payment System, or CIPS, which is Beijing’s global-payments solution for yuan-denominated transactions, according to Abdi Mohamed, chief executive officer of the South African bank’s Kenyan unit.
“We are a key part of the early conversations on the system, what it could mean for the continent in terms of an opportunity and as a platform,” he said in an interview in Kigali, Rwanda on Friday.
“It’s a good addition to the global payment systems that we already have.”
Africa’s biggest lender, Standard Bank Group, became the first in the region to connect directly to CIPS in November, processing R9.5 billion ($572 million) in transactions in the past six months. Ecobank Transnational CEO Jeremy Awori said separately on Friday that it was applying to join CIPS.
Currently, African traders convert their local currencies into dollars before exchanging them again into yuan, a process that increases costs, exposes them to dollar shortages and makes economies more susceptible to foreign-exchange volatility.
Absa — South Africa’s third-biggest lender with a regional footprint in 12 countries — is looking “at how to make that process easier in a way that we can settle it directly,” Mohamed said.
Absa Kenya plans to double its pre-tax earnings in the next five years, sustaining the momentum achieved in the last five, Mohamed said.
A key risk to that outlook is the effect of the Iran war on supply chains and inflation, which will hurt growth prospects, he said.
Secondary impacts on credit quality, credit performance, and default rates have yet to emerge, but the most immediate effect Absa anticipates is more demand for loans and higher credit limits for imports due to an increase in the cost of goods.
Absa is also eying acquisitions to grow its market share in Kenya, Mohamed said.
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