Banking in Sub-Saharan Africa : The Macroeconomic Context
Departmental Papers / Policy Papers, September 26, 2013
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Bibliographic details
- Authors: Montfort Mlachila, Masafumi Yabara
- Published: September 26, 2013
- Series: Departmental Papers / Policy Papers
Executive summary
- Many countries in sub-Saharan Africa (SSA) have seen accelerated growth for an extended period of time since the mid-1990s, making a clear break with their long stagnant growth during the previous two decades.
- The region faces significant medium- to long-term challenges: reducing poverty, overcoming infrastructure bottlenecks, enhancing productivity and skill levels, and improving the business climate.
- The banking sector in SSA remains underdeveloped, reducing its contribution to growth.
- Limited integration of SSA banking systems with global financial markets helped countries weather adverse effects of the global financial crisis.
- It is imperative that the banking sector plays a more active role in SSA to achieve sustainable, private-sector-led growth.
Macroeconomic context and outlook
- Recent features of SSA growth and macroeconomic performance:
- Accelerated growth since the mid-1990s after two decades of stagnation.
- Persistent structural challenges that could constrain medium- to long-term growth (poverty, infrastructure, productivity, skills, business climate).
- The paper discusses the outlook for the coming years based on the recent literature on SSA.
Banking sector features and crisis experience
- Main features of SSA banking systems reviewed in the paper:
- Underdeveloped banking sector that limits its contribution to economic growth.
- Limited integration with global financial markets, which provided some insulation during the global financial crisis.
- The paper reviews how SSA banking systems were affected by the global economic crisis and highlights factors that could influence future financial sector developments in the region.
Policy implications and priorities
- The banking sector must become more active in supporting private-sector-led, sustainable growth.
- Addressing broader structural impediments (infrastructure, productivity, skills, business climate) is important to amplify the banking sector’s contribution to growth.
- Financial sector development should be considered alongside macroeconomic policies and structural reforms to enhance long-term growth prospects.