August 2006 “Making Finance Work for Africa“ AFRICA FinancialSector AFTFS Going Forward, Priorities for Africa Access to Finance and Financial Infrastructure Ann Rennie, World Bank

AFRICA FinancialSector AFTFS “Making Finance Work for Africa“ African banking systems still shallow Financial sector development is lower in Africa than in other regions –Private Sector Credit / GDP averages 11% in low-income countries in Africa compared to 21% for non-African low-income countries Increasing access to finance and financial deepening will –promote enterprise productivity –foster growth –contribute to poverty reduction and the reduction of inequality

AFRICA FinancialSector AFTFS “Making Finance Work for Africa“ (Average rating by surveyed firms of each item as an obstacle to business operation and growth) Access to Finance Cost of Finance East Asia & Pacific Europe & Central Asia Latin America & Caribbean Middle East & North Africa South Asia Sub-Saharan Africa Businesses name Cost and Access to Finance as key constraints

AFRICA FinancialSector AFTFS “Making Finance Work for Africa“ AfricaCarib And Pacific ECALat AmMNAS&E Asia % of adult population with an account < 20% 20-30% 30-40% > 40% Access to Finance by Households Fewer than 20% of African adults have access to financial services

AFRICA FinancialSector AFTFS “Making Finance Work for Africa“ Lack of creditor rights and financial information discourage bankers from lending Private Sector Credit as %GDP, 2004 Doing Business Legal Rights Index Average Private Sector Credit as %GDP Doing Business - Credit Information Index Credit information and enforcable creditor rights foster financial access and depths Focus on information often more effective than legal and judicial reform Catching-up on financial information infrastructure: –Build credit registries where they don’t exist (still 40% of African countries, compared to 20% in other regions) and enhance coverage of existing institutions –Build efficient systems for collateral registration –Enhance reliability, quality and availability of corporate information: Accounting, Corporate Registries etc.

AFRICA FinancialSector AFTFS “Making Finance Work for Africa“ Going Forward: Who needs to do what? Commercial Banks: –‘The wave raises all boats’: Achieve economies of scale through cooperation, coordination and sharing of information –Build capacity to benefit from information: Develop adequate business models and invest in skills and technology –Promote awareness and financial literacy of new customer groups Government: –Use convening power to facilitate private initiative and coordination –Act as broker between different interest –Provide adequate legal and regulatory framework, Don’t over regulate –Set incentives for information sharing and reporting –Ensure protection of consumer rights and broaden financial literacy

AFRICA FinancialSector AFTFS “Making Finance Work for Africa“ Development Partner Support Technical Assistance through World Bank, IFC, IMF and other development partner projects 2 new initiatives: –IFC/PEP Africa: Africa Credit Bureau Program –FIRST (WB/IFC): Africa – Credit Reporting and Financial Information Infrastructure Program