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Germany, World Bank, AfDB launch
partnership on finance in Africa
Accra, Oct. 22, Ghanadot/GNA - A new partnership to support
stronger financial systems in Africa has been launched by
Germany, the World Bank and the African Development Bank in
Washington.
A statement from the African Development Bank on Monday said
Germany, which championed the partnership under its G8
presidency, stressed that by strengthening African financial
systems, the new effort would support economic growth, job
creation and poverty reduction. The partnership was launched
last Friday, according to the statement.
Heidemarie Wieczorek-Zeul, Federal German Minister for
Economic Cooperation and Development, said: "Economic
development is only possible if there is a thriving
financial sector which accords both men and women access to
appropriate financial services, enabling them to save, while
allowing businesses to invest and create lasting
employment."
She added that the lack of financial services was one of the
main obstacles to private sector development in Africa.
A recent World Bank study, Making Finance Work for Africa,
points to emerging opportunities for increasing the
availability of affordable finance, so that enterprises end
up with access to financial services that will help them
invest in productivity and expand.
During this past decade, African finance has been
strengthened by a wave of reforms through which financial
repression diminished, state-owned banks became privatized,
and foreign banks re-entered the market.
"New products and technologies have created significant
opportunities for innovation. The emergence of stronger
African banks and increasing regional integration enable the
provision of finance on a larger scale," the statement said.
Robert T. Zoellick, President of the World Bank, added:
"Financial sector development will be a strategic driver of
growth and employment in Africa. African firms view access
and cost of finance as two of the three primary constraints
to doing business".
The statement said the study pointed out that some of the
challenges that remain to be addressed.
It found that only 20 per cent of adults in sub-Saharan
Africa hold a bank account at a formal or semi-formal
institution, adding that increasing access to financial
services would enable poor people, women in particular, to
increase their household incomes, build assets, invest in
health and education and reduce their vulnerability to
household emergencies.
It also found a very low share of deposits in African
financial institutions flow into loans to private firms,
saying rather, banks keep high levels of liquid assets and
acquire government debt instruments.
"Firm surveys show that access to finance is one of three
biggest constraints for enterprise growth in Africa. More
African firms name limited access to and high costs of
finance as a key constraint in Africa than in any other
region in the world."
The study noted the availability of credit for the private
sector was improving, but at 14 per cent of GDP was still
insufficient to drive growth and private sector development.
It said interest costs, administrative expenses and
collateral requirements for loans were significantly higher
in Africa. Interest rate spreads - a measure of financial
sector efficiency - average eight per cent in Africa
compared to the world average of 4.8 per cent.
The statement said in addressing these challenges, policy
makers and financial service providers could take advantage
of the technological innovations emerging on the continent.
With the entrance of new technologies like mobile phones
into the African market, there was great potential to help
overcome remoteness and process-cost barriers to providing
payments and making deposits, as well as other types of
financial services.
GNA
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