The 2019 Annual Meetings of the African Development Bank Group will be held from 11-14 June 2019, in Malabo, Republic of Equatorial Guinea. Find out more
African economies have been growing at an average GDP rate of more than five per cent annually since 2004, and many are expected to attain middle to high income level by 2060. However, this vision cannot be achieved without a sound, developed and competitive financial sector. Notably, a well-functioning financial system will be a critical prerequisite to achieve sustained and inclusive growth.
The financial sector in Africa has made significant progress in terms of development and stability. Many African countries have made progress in reforming their institutional framework and creating an enabling environment for increased access to financial services. Increasing penetration ratios observed in several African countries thanks to innovative business models such as mobile banking are particularly noteworthy. Nevertheless, many challenges remain. For financial services to become more available, accessible, affordable and henceforth inclusive, innovative financial instruments and well-functioning financial infrastructure are needed for the benefit of the poor and other vulnerable groups.
In a recent book entitled “Financial Inclusion in Africa” (co-edited by Thouraya Triki and Issa Faye) , we document the state of financial inclusion in Africa and provide policymakers, financial sector stakeholders and development actors with acute information on the existing opportunities and specific challenges that need attention and action. Although access to financial services has dramatically improved in African countries, many individuals and firms are still excluded from formal financial systems. The book further notes that less than a quarter of adults in Africa have an account with a formal financial institution, and many adults in Africa use informal methods to save (such as Rotating Savings and Credit Associations [ROSCAs], tontines, chit funds, burial societies) and borrow (friends, family and informal private lenders). Nevertheless, the success of some innovative financial instruments such as mobile money in East Africa provides scope for more opportunities in financial inclusion, particularly for the poor, women, youth, those living in rural areas, and small and medium enterprises (SMEs).
A novelty of this publication is the analysis it makes of the impact that political instability and economic vulnerability can have on the ability of households and SMEs to access different types of financial services. According to the book, only 14 per cent of adults living in African fragile states have an account at a formal financial institution. Given the high risk of African countries falling in and out of fragility, the book argues that it is imperative that successful and sustainable financial inclusion be part of the national recovery strategies. The book also encourages more coordination among development partners for a contextualized, flexible and customized approach to financial inclusion in fragile states.
For financial inclusion to become a driver of sustainable and inclusive growth in Africa, the authors prescribe a series of strategic options related to the transformative role that technology could play in achieving greater financial inclusion, the need to reconcile financial inclusion and financial stability, the lessons that Africa could learn from other developing countries, and the role of Development Finance Institutions (DFIs) in helping design and implement the financial inclusion agenda in Africa. The main messages of the book are: