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USA Today: Africa’s banks are doing what U.S. banks aren’t: Winning

USA Today, February 27, 2018: Africa’s banks are doing what U.S. banks aren’t: Winning

The traditional bank has been under threat for years. In the U.S., branches have been closing at a rapid pace — 1,771 in 2017, according to a National Community Reinvestment Coalition study — as they exit less profitable rural areas and try to lower costs, boost profits and regain trust in the aftermath of the financial crisis.

However, Africa’s banks are thriving. In fact, the continent is the banking industry’s second-fastest growing market and profitable region.

McKinsey says that in 2017, banks in Africa had a return on equity—a measure of profitability — of nearly 15%, second only to banks in Latin America and more than double that achieved by similar institutions in developed markets in Asia, Europe and the U.S. Further, Africa’s banking industry is also expected to grow at a faster annual rate over the next five years compared to its counterparts in developed markets: 8.5% in Africa, versus about 4.5% for banks in advanced countries.

African banks are doing well because they are innovating in how they are meeting huge unmet needs among African consumers, according to Mutsa Chironga, a partner in McKinsey’s office in Johannesburg, South Africa, and one of the authors of its report.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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