august 2006 “making finance work for africa“ africa financialsector aftfs going forward,...
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August 2006
“Making Finance Work for Africa“AFRICA
FinancialSectorAFTFS
Going Forward, Priorities for AfricaAccess to Finance and Financial Infrastructure
Ann Rennie, World Bank
AFRICA FinancialSector
AFTFS
“Making Finance Work for Africa“
African banking systems still shallow
Financial sector development is lower in Africa than in other regions– Private Sector Credit / GDP averages
11% in low-income countries in Africa compared to 21% for non-African low-income countries
Increasing access to finance and financial deepening will– promote enterprise productivity– foster growth– contribute to poverty reduction and
the reduction of inequality
AFRICA FinancialSector
AFTFS
“Making Finance Work for Africa“
(Average rating by surveyed firms of each item as an obstacle to business operation and growth)
Access to Finance
Cost of Finance
East Asia & PacificEurope & Central AsiaLatin America & CaribbeanMiddle East & North AfricaSouth AsiaSub-Saharan Africa
Businesses name Cost and Access to Finance as key constraints
AFRICA FinancialSector
AFTFS
“Making Finance Work for Africa“
0
10
20
30
40
50
60
70
80
90
100
Africa Carib AndPacific
ECA Lat Am MNA S&E
Asia
% o
f ad
ult
popu
latio
n w
ith a
n a
ccou
nt
< 20% 20-30% 30-40% > 40%
Access to Finance by Households
Fewer than 20% of African adults have access to financial services
AFRICA FinancialSector
AFTFS
“Making Finance Work for Africa“
Lack of creditor rights and financial information discourage bankers from lending
Private Sector Credit as %GDP, 2004
Doing Business Legal Rights Index
Average Private Sector Credit
as %GDP
Doing Business - Credit Information Index
Credit information and enforcable creditor rights foster financial access and depths
Focus on information often more effective than legal and judicial reform
Catching-up on financial information infrastructure:– Build credit registries where they don’t
exist (still 40% of African countries, compared to 20% in other regions) and enhance coverage of existing institutions
– Build efficient systems for collateral registration
– Enhance reliability, quality and availability of corporate information: Accounting, Corporate Registries etc.
AFRICA FinancialSector
AFTFS
“Making Finance Work for Africa“
Going Forward: Who needs to do what? Commercial Banks:
– ‘The wave raises all boats’: Achieve economies of scale through cooperation, coordination and sharing of information
– Build capacity to benefit from information: Develop adequate business models and invest in skills and technology
– Promote awareness and financial literacy of new customer groups
Government:– Use convening power to facilitate private initiative and coordination– Act as broker between different interest– Provide adequate legal and regulatory framework, Don’t over regulate– Set incentives for information sharing and reporting– Ensure protection of consumer rights and broaden financial literacy
AFRICA FinancialSector
AFTFS
“Making Finance Work for Africa“
Development Partner Support
Technical Assistance through World Bank, IFC, IMF and other development partner projects
2 new initiatives:– IFC/PEP Africa: Africa Credit Bureau Program
– FIRST (WB/IFC): Africa – Credit Reporting and Financial Information Infrastructure Program