Finance in Africa, A ‘cautious hope’

I read quite a bit about economics and finance. Lately, I have read some stuff by Thorsten Beck (look him up). In a nutshell, the finance environment in Africa has quite changed; cautious hope is in the air for finance in Africa. While the global crisis may have dented some of the progress made since the beginning of the 21st century, one feels the optimism and sees positive trends. A deepening of financial systems can be observed in many African countries, with more financial services, especially credit, provided to more enterprises and households.

New players and new products, often enabled by new technologies, have helped broaden access to financial services, especially savings and payment products. Innovative approaches to reaching out to previously unbanked parts of the population go beyond cell-phone based M-Pesa and Airtel Money in Kenya and other basic transaction accounts through banking services such as M-Kesho still in Kenya and Mzansi in South Africa.

Competition and innovation dominate the African Financial Systems. Finance in Africa still faces problems though; scale and volatility and the same liquidity that helps reduce volatility and fragility is also a sign of the limited intermediation capacity on the continent. Nonetheless, globalization, technology and increasing regional integration sets to provide new opportunities for finance in Africa.

The environment in which African systems operate has changed over the last four or so years. Credit to the private sector has risen by more than 20% points since the early 1990’s. There has been an increasing trend toward regional integration within the continent over recent years, though this trend started well in the early to mid 2000’s. Kenyan, Moroccan, Nigerian and South African banks are rapidly expanding operations in the region. Walking through Nairobi streets you will easily spot United Bank of Africa and Eco Bank; both of Nigerian origin. In Rwanda, Uganda and the recently independent South Sudan, Kenya Commercial Bank and Equity Bank of Kenya are a welcoming face to Juba and other smaller towns.

The transformational impact of the deepening and broadening of financial system technology has become clear. With about 14 million clients across the nation, Kenya’s M-Pesa is the world’s most widely used telecommunication-led mobile money service. Noteworthy is the British government’s interest in learning from Kenyan firms about Mobile money and how it has revolutionized the Kenyan Financial Sector; a statement expressed strongly by the Lord Mayor of London on being hosted by the Kenyan Ministry of Finance at a cocktail at Nairobi’s Serena Hotel early in the month.

Globally too, the environment is different; even with the world’s leading economies undergoing or recovering from recession, the global financial system has switched heavily to the south and the east as reflected strongly by the replacement of the G7 by the G20 as the major international policy coordination policy.

In the next post; Financing Africa does not belittle Africa’s significant challenges… 

Till Then, Cheers! 

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