Banking in Sub-Saharan Africa: What Went Wrong?

IMF Working Papers, April 1, 2004

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Study the origins of banking crises in sub-Saharan Africa, drawing upon the experience of ten countries during the period 1985-95.
Examine which factors were the most important sources of these crises.
Analyze the complex role of the government in banking in sub-Saharan Africa, the channels through which governments intervened, and the economic and institutional environment in which banks operated.

The banking crises examined did not represent an entirely special case; a number of factors identified in the general literature, including macroeconomic shocks, were highly relevant.
Several features of the crises were nonetheless specific to sub-Saharan Africa.
These banking crises were the prototype of endemic crises associated with heavy government intervention in the banking system.

Banking, Banking crises, Commercial banks, Credit, Financial crises, Financial institutions, Foreign banks, Loans, Money
Keywords explicitly addressed: Africa, bank assets, bank capital, bank financing, bank performance, bank supervisor, Banking Crises, banking crisis, broad money, CFA franc, Commercial banks, Credit, credit policy, development bank, Foreign banks, Government Policy, Loans, local bank, Macroeconomic Shocks, private sector, problem bank, Regulation, risk-management practice, Sub-Saharan Africa, terms of trade, West Africa, WP

Relative importance of macroeconomic shocks versus region-specific institutional and policy factors.
The role of heavy government intervention as a driver of endemic banking crises.
Multiple channels of government intervention affecting bank behavior and systemic stability.

Understanding origins of banking crises requires accounting for both general factors (e.g., macroeconomic shocks) and region-specific institutional/policy environments.
Policy attention to the nature and extent of government intervention in banking systems is central to addressing endemic crisis risk.

IMF Working Paper by Françoise Le Gall, Roland Daumont, and François Leroux (Working Paper No. 2004/055, April 1, 2004).