Library

Financing Africa: Through the crisis and beyond - English

Financing Africa: Through the crisis and beyond

This book, a joint effort of the African Development Bank, the German Federal Ministry of Economic Cooperation and Development, and the World Bank, demonstrates that Africa is making progress in relaxing these constraints. New players and products, enabled by new technologies and business models, have helped broaden access to financial services, especially savings and payment products. Critically, African finance has been stable for quite a while now; after a peak of banking crises in the 1980s, there have been few systemic banking crises since then. Despite the recent global financial crisis, banks in Africa are, on average, well capitalized and liquid. At the same time, Africa faces persistent but not insurmountable challenges, namely its small scale, informality, volatility, and poor governance. Many firms and most households are still excluded from access to financial services, especially long term finance. Infrastructure financing needs remain largely unmet. Agricultural finance has been ignored by commercial financiers for being too high-cost and high-risk, aggravated by the same challenges enumerated above.

Financing Africa: Through the Crisis and Beyond is a call to arms for a new approach to Africa’s financial sector development. First, policy makers should focus on increasing competition within and outside the banking sector to foster innovation. This implies a more open regulatory mindset, possibly reversing the usual timeline of legislation-regulation-innovation for new players and products. It also implies expanding traditional infrastructure, such as credit registries and payment systems beyond banks. Second, the focus should be on services rather than existing institutions and markets. Expanding provision of payment, savings and other financial services to the unbanked might mean looking beyond existing institutions, products, and delivery channels, such as banks, traditional checking accounts, and brick-and-mortar branches. Third, we should focus on the demand constraints as well as the supply ones; expand financial literacy programs for households and enterprises; and address nonfinancial constraints, especially for small enterprises and in rural areas.