## Accelerating Financial Sector Development to Boost Growth in Sub-Saharan Africa _IMF Blog, July 13, 2016_ ## Source details **Canonical URL:** [Accelerating Financial Sector Development to Boost Growth in Sub-Saharan Africa](https://www.imf.org/en/blogs/articles/2016/07/13/accelerating-financial-sector-development-to-boost-growth-in-sub-saharan-africa) ## Other formats - [Markdown version](/en/blogs/articles/2016/07/13/accelerating-financial-sector-development-to-boost-growth-in-sub-saharan-africa/index.md) - [Structured JSON version](/en/blogs/articles/2016/07/13/accelerating-financial-sector-development-to-boost-growth-in-sub-saharan-africa/index.json) - [Bundle manifest](/en/blogs/articles/2016/07/13/accelerating-financial-sector-development-to-boost-growth-in-sub-saharan-africa/bundle-manifest.json) ## Bibliographic details - Authors: Anne-Marie Gulde-Wolf - Published: July 13, 2016 --- ### Overview and rationale - Author: Anne-Marie Gulde-Wolf - Date: July 13, 2016 - Deeper financial development—measured by increases in deposits and loans, their accessibility, and improved financial sector efficiency—supports sustainable growth by mobilizing savings and directing funds into productive uses, facilitating a more efficient allocation of resources and increasing overall productivity. - Financial development also: - Supports a larger variety of products and services. - Improves risk management. - Makes payments easier. - Helps lenders monitor clients. - Provides instruments (for example, insurance packages) and information that help households and firms cope with negative events, stabilizing consumption and investment. ### Progress to date and persistent challenges - Notable advances: - Innovative mobile-based financial services have spread rapidly, especially in East Africa (examples cited: M-Pesa, M-Shwari, and M-Kesho in Kenya), reducing transaction costs and facilitating transactions in the absence of traditional financial infrastructure. - Rapid growth of microfinance, expanding services to lower-income customers. - Expansion of Pan-African banks (locally-owned banks operating across several countries) that: - Filled service gaps left by European and U.S. banks. - Promoted greater economic integration. - Increased competition in the sector. - The region’s median ratio of private sector credit to GDP has doubled from its 1995 level. - Remaining challenges: - Financial inclusion still lags behind other developing regions. - Financial market depth and institutional development remain much lower than in other regions, except for the region’s middle-income countries. - Pan-African banks create supervisory and transparency challenges, including the need to strengthen consolidated and cross-border oversight, internal controls, and transparency. - Regulations in many countries are not fully in line with global best practices and their implementation remains weak. ### Growth potential and stability effects - Measured potential: - There is a substantial gap between current financial development levels in many sub-Saharan African countries and what could be reached by comparison with regions of similar structural characteristics. - Closing this financial development gap could yield about 1½ percentage points additional annual growth for the median sub-Saharan African country, with variations across country groups. - Volatility effects: - Higher financial development can reduce the volatility of growth, especially when initial financial development is relatively low. - Mechanism: more financial development relaxes credit constraints and provides instruments to withstand adverse shocks. - Caveat: as financial depth increases, its contribution to reducing volatility declines because greater depth can increase the propagation and amplification of shocks. ### Policy priorities and recommendations - Strengthen macroeconomic fundamentals and institutions: - Provide strong legal and institutional frameworks, with particular emphasis on corporate governance, to create an environment conducive to financial sector development. - Improve regulation and supervision: - Upgrade regulatory frameworks toward global best practices. - Strengthen supervisory capacity and enforcement powers. - Harmonize regulations and supervisory procedures to avoid regulatory arbitrage. - Establish appropriate mechanisms for resolving nonviable financial institutions. - Monitor and manage risks from innovation: - Financial supervisors should closely monitor risks related to mobile money transactions as they spread in the low-income segment. - Ensure households’ funds are safe while preserving the benefits of easier transactions, savings opportunities, and access to small loans for entrepreneurship. *Source: IMF blog post “Accelerating Financial Sector Development to Boost Growth in Sub-Saharan Africa,” Anne-Marie Gulde-Wolf, July 13, 2016.* --- ## Content in this bundle - **Acelerar o desenvolvimento do setor financeiro para impulsionar o crescimento na África Subsariana** - [Acelerar o desenvolvimento do setor financeiro para impulsionar o crescimento na África Subsariana (Markdown version)](/external/lang/portuguese/np/blog/2016/071316p.pdf.md){rel="alternate" type="text/markdown"} - [Acelerar o desenvolvimento do setor financeiro para impulsionar o crescimento na África Subsariana (PDF)](/external/lang/portuguese/np/blog/2016/071316p.pdf){rel="external" type="application/pdf"} - **Chapter 3** - [Chapter 3 (Markdown version)](/external/pubs/ft/reo/2016/afr/eng/pdf/chapter3.pdf.md){rel="alternate" type="text/markdown"} - [Chapter 3 (PDF)](/external/pubs/ft/reo/2016/afr/eng/pdf/chapter3.pdf){rel="external" type="application/pdf"} - **Staff Discussion Note** - [Staff Discussion Note (Markdown version)](/external/pubs/ft/sdn/2015/sdn1508.pdf.md){rel="alternate" type="text/markdown"} - [Staff Discussion Note (PDF)](/external/pubs/ft/sdn/2015/sdn1508.pdf){rel="external" type="application/pdf"} --- ## References - [https://www.imf.org/wp-content/uploads/2016/07/afrreo-chap3-cht1.jpg](https://www.imf.org/wp-content/uploads/2016/07/afrreo-chap3-cht1.jpg) - [https://www.imf.org/wp-content/uploads/2016/07/afrreo-chap3-cht2.jpg](https://www.imf.org/wp-content/uploads/2016/07/afrreo-chap3-cht2.jpg) - [https://www.imf.org/wp-content/uploads/2016/07/afrreo-chap3-cht3.jpg](https://www.imf.org/wp-content/uploads/2016/07/afrreo-chap3-cht3.jpg) _Source: https://www.imf.org/en/blogs/articles/2016/07/13/accelerating-financial-sector-development-to-boost-growth-in-sub-saharan-africa_