Hurdles to setting up a banking operation in a frontier market like South Sudan are great, but so are the rewards, Reuters reports.

Barely a quarter of Sub-Saharan Africans have a bank account, and many in Africa’s newest nation stash money under their pillows. In most rural areas of South Sudan, a nation of 11 million people, there is no banking at all, according to World Bank figures.

South Sudan ranked 186th of 189 nations in World Bank’s ease of doing business survey.

“You have to be thick-skinned to enter some of these markets,” said Francis Mwangi, a banking analyst at Nairobi-based Standard Investment.

Running a bank in South Sudan means finding scarce foreign exchange, accepting limited regulatory protection, finding skilled workers when most people have never been to school and securing a building strong enough to house a bank branch, according to Reuters.

Finding such a building was the one of first challenges for Oduor-Otieno, who was Kenya Commercial Bank’s deputy CEO when he visited South Sudan in 2005.

Six years later, South Sudan declared independence and now, KCB has more than 25 banks there.

Hotels are opening but there are almost no paved roads in a country the size of France, Reuters reports.

That has not stopped KCB opening branches in all 10 states – the only bank with such reach. Competition is mounting, Reuters reports.

“The demand is enormous and the banks are just mushrooming,” said Zahia Lolila, coordinator for advisory services at World Bank’s International Finance Corp. in Juba. But “you’re building an institution from zero. You don’t have bank supervisors. Facilities, equipment, computers, management information systems – everything has to
be built from scratch.”

The government demands that most staff in any bank must be locals – difficult to pull off when the literacy rate is 40 percent for men and 16 percent for women, Reuters reported.

“Experienced staff, experienced bankers, experienced in any area, there are (only) a few,” said Willis Osir, managing director of the Co-operative Bank of South Sudan.

Foreign currency is another challenge.

“They (the government) have one sole source of foreign currencies – that is oil,” said Osman Ahmed Osman, deputy general manager of South Sudan Commercial Bank.

Most of the business is deposits and cash withdrawals. Lending is a challenge when few people can offer collateral such as title deeds. “Most small businesses will not have that so it has been hard for them to grow,” Deputy Finance Minister Mary Jervase Yak told Reuters.

Title deeds are only available in Juba, an official said.

One way to expand the reach of banking services would be to import mobile phone banking technology such as Kenya’s M-Pesa payments system, the report said. But some politicians fear the rush of new banks into South Sudan may be assisting capital flight.

For many in South Sudan, banking remains a remote prospect.

“In the rural areas, people keep their money under their pillows if they have any money at all,” Yak told Reuters.