Africa Finance Forum Blog

The State of SME Banking in Africa

11.03.2019J-P Stijns, Economist, EIB & A. Pelletier, Lecturer, Goldsmith U. of London

In the context of EIB’s Africa Day, the EIB in partnership this year with UNIDO, officially launched its study of banking in Africa on Thursday November 22nd in Addis Ababa. This blog post presents some of the key findings EIB survey of banking groups in sub-Saharan Africa (SSA) with particular emphasis on questions related to SME financing. The survey covered 25 pan-African banks.

Strategic market focus of banks: large multinationals, large local companies, retail clients or SMEs? Three salient results came out of responses to this question. First, SMEs are reported as the main strategic focus by 60% of banking groups. This reflects in our view intensifying competition in many SSA banking markets, which is incentivizing banks to move out of their comfort zone and to maintain profitability by going after new borrowers.

Retail clients are now the next most important strategic focus for banking groups in SSA and are reported as most strategic by 30% of banking groups. This share has risen remarkably since 2016, reflecting the growing reliance by banks on deposit financing. This rising strategic focus on retail clients is also reflecting a growing tendency of savers to entrust their savings with banks. It implies an opportunity in terms of helping individuals to save and for banks to lend more in local currency. However, the issues of funding stability and consumer protection are also becoming more prominent with rising reliance on deposit financing.

Surveyed banks reported being less focused on large multinationals and large local companies going forward. Large multinationals are not mentioned anymore as a strategic focus by banking groups in our survey while banking groups focusing on large local companies have decreased from 25% to 10% of respondents. This may reflect the intensification of competition in lending to these segments, and the relative increase in opportunities in the SME and retail segment.

Main barriers to financing SMEs. More than one third of banking groups reported that the lack of collateral of sufficient quality was the main obstacle to SME lending in the region. Another third of the banking groups reported that it was the high rate of default. These figures suggest that portfolio guarantees are an important tool for development partners to support bank lending to SMEs. Indeed, 45% of banking groups report their needs are met, indicative of increased availability of such products, from various development partners, including the EIB. However, half of the banking groups report that their needs are either partially met or largely unmet, indicative of a large untapped market for portfolio guarantee tools. Clearly, there is a need to design and deploy competitive and effective portfolio guarantee products. This is a potentially very important policy option for development partners, especially if accompanied by relevant capacity building programmes that help boost managerial capacity within targeted SMEs.

Indeed, the lack of managerial capacity was the third most important obstacle to financing SMEs, cited by 17% of respondents. This suggests that technical assistance targeted towards developing SME management capacity both in terms of financial and business skills enhancement can in itself be an important tool at the disposal of development partners. The EIB is already running such capacity building programmes in Southern and Eastern Africa. These provide for capacity building initiatives both at the level of the financial intermediaries as well as for their final beneficiaries. In East Africa over 200 capacity building activities were carried out between 2014 and 2018 with over 9,000 participants being trained, these being the staff and clients of 30 EIB financial intermediaries. These encouraging results coupled with strong demand expressed by EIB clients explain why the EIB will be deploying in 2019 a similar technical assistance facility in West and Central Africa.

Demand for loans in local vs foreign currencies. Remarkably, 30% of banking groups report that demand for loans in local currencies is growing above market trends, 70% in line with market trends. This indicates that credit lines to banking groups is local currency do meet strong demand from local banks and are a very important instrument to help banks lend to local economic players with revenue streams in local currency. Demand for loans in hard currency (dollars, euros, etc.) is also noticeable although less remarkably. These results indicate that credit lines in hard currency are still relevant for at least some clients, presumably those with revenue streams in hard currency such as exporters and importers and, of course, multinational corporations.

In conclusion. We are observing a rising level of competition which is pushing banks operating in SSA to step out of their comfort zone and to get more serious about lending to SMEs. Having said that, in the World Bank’s Enterprises Survey, the unavailability of loan is still cited by a large share of SMEs as their main obstacle to expanding their business. Given the challenges faced by banks to offer loans to SMEs, the banking groups we surveyed indicate a need for more local currency lending and portfolio guarantees. Development partners will need to meet this demand if lending to SMEs is to be further expanded without putting too much currency or credit risk on the balance sheet of local banks.

Another way partners like EIB contribute to the financial stability of local banking groups is by offering longer tenors, allowing banks to reduce risk related to maturity transformation and facilitating lending for more productive investment purposes. In addition there is more that can be done than just the provision of longer term funding: capacity building initiatives can be stepped up to enhance the creditworthiness of SMEs, not just to improve their access to finance but also to make more productive use of bank financing and enable them to punctually meet their debt service obligations.

There are no shortages of opportunities to make SSA’s banking sectors more inclusive and to increase their contribution to development. Looking ahead, challenges also abound. As first-time depositors and borrowers expose themselves increasingly to the banking sector, much is at stake. Should depositors lose their savings in a bank run or should borrowers suffer from over-indebtedness, progress could go in reverse for an unpredictably high number of years. On the banks’ side, rising non-performing loans (NPLs) raise concerns about the sustainability of the rapid deepening of SSA’s banking sectors.

As the global business cycle becomes less supportive and banks reach out to riskier borrowers, there is a need for banks to up their game in terms of governance and risk management. Development partners, including the EIB, need to support local banks in their efforts to meet these challenges, including via the provision of appropriate technical assistance targeting risk management and compliance skills of bank staff.

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About the Authors

Jean-Philippe Stijns is Senior Economist at the European Investment Bank (EIB), currently responsible for sovereign and banking sector risk rating in Central African countries, supporting the EIB’s operations in the corresponding countries. He is the coordinator of and a contributor to the EIB’s annual Study of Banking Sectors in sub-Saharan Africa. He also coordinates EIB’s survey of African banking groups. Prior to joining the EIB, Jean-Philippe held positions at the IMF’s Africa Department, with the OECD’s Development Centre, as Investment Strategist for ING, and as Assistant Professor of Macroeconomics and International Economics at Northeastern University. While working at the Development Centre, he contributed to the African Economic Outlook.

Adeline Pelletier is a lecturer in Strategy at the Institute of Management Studies. Previously, she was Assistant Professor in Business Administration at Instituto de Empresa (2015/16) and postdoctoral researcher affiliated to the Centre for Economic Performance at the London School of Economics (2015). She also holds an MPhil in Development Studies from the University of Cambridge (2011) and an MPhil in Economics from Sciences-Po Paris (2006). She has worked in both public and private financial institutions. She started her career as an economist at the Banque de France in the African Franc Zone and Development Financing department. She subsequently worked in investment banking as an Economist at HSBC in Paris and then as an Equity Research Associate at Societe Generale in London. She has carried out consulting work for the OECD, the U.K. Department for International Development (DFID), the African Development Bank (AfDB), and for Ashoka, a nonprofit supporting social entrepreneurs.

The potential of digital platforms as distributors and enablers of insurance in Africa

04.03.2019Kate Rinehart, Chernay Johnson & Doubell Chamberlain - CENFRI

The past decade has seen the emergence of digital platforms. These digital platforms (also known as multi-sided platforms[1]) connect buyers and sellers of goods and services and allow them to seamlessly transact with one another. They are providing new ways for workers, micro, small and medium enterprises (MSMEs), and consumers traditionally operating in the informal economy to participate in the formal economy, and as such are changing the nature of many economic activities. We think that digital platforms offer innovative solutions to overcome barriers to low insurance penetration in African markets. In the past, those operating in the informal economy have been hard to reach with formal insurance solutions that mitigate risks that they face. Digital platforms have the ability to transform the delivery of traditional insurance products to underserved consumer segments. They have an established client base, reputation and communication channel, and hold unique insights into the financial needs of their users. This means that like mobile network providers (MNOs), digital platforms can serve as a low-cost distribution channel for insurance products.At the 14th International Microinsurance Conference held in Zambia in November 2018, Cenfri hosted a plenary session that explored the role of digital platforms in inclusive insurance. Panellists included Richard Leftley, the CEO of MicroEnsure, Amolo Ng’weno, East African Director for BFA, and Adrien Lebegue, Business Development Director the Chinese online insurer, Zhong An. The panel was moderated by Cenfri’s founder and Managing Director, Doubell Chamberlain. We highlight major takeaways from the plenary session below.

There are many digital platforms and platform workers in Africa

A scan of eight African countries (Ghana, Kenya, Nigeria, Rwanda, South Africa, Tanzania, Uganda, Zambia) conducted by the insight2impact facility shows that there are 283 unique platforms operating in Africa, 81% of which originate from Africa. Within these countries, between one to three percent of adults earned an income from platform work in 2017, which equates to an estimated 4.8 million platform workers across these countries (i2i facility, 2018).

Scale through platforms is possible, but necessary preconditions must be in place.

Zhong An, the first online only digital insurer in China, was established in 2012 by Tencent, Alibaba and Ping An. It later established a subsidiary, Zhong An Technology, which creates and commoditizes advanced technological offerings for insurance companies. Zhong An self-identifies as a technology company doing insurance and over half of their employees are either engineers or technicians.

With the objective of “redefining insurance in the connected world,” Zhong An has become one of the most effective and advanced online insurance companies, having issued over five billion policies in 2017 to more than 432 million policyholders. Zhong An operates across five major ecosystems (lifestyle consumption, travel, health, consumer finance and auto) and has 307 ecosystem partners.There are several key factors to Zhong An’s success. Firstly, they have strong partners with established reputations. Secondly, their ecosystem partners have hundreds of data points on their consumers, which Zhong An utilises to design products that extend beyond traditional insurance and address consumer needs. Lastly, China’s regulation and existing digital infrastructure enables payments mechanisms and mobile connectivity.There are many factors that differentiate China from Africa. China has a population of 1.38 billion, whereas Sub Saharan Africa is made up of 48 countries with an average population of 22.1 million per country (World Bank, 2017). Regulatory harmonisation has not happened in Africa. Albeit improving and growing, payments infrastructure and mobile connectivity in Africa dwarf in comparison to China. For instance, 49% of the adult population in China used the internet to buy something online in 2017, compared with 25% in Kenya, 14% in South Africa, 6% in Nigeria, 5% in Rwanda and (Global FinDex, 2017).Specific enabling factors in China, such as payments infrastructure and mobile connectivity, have aided in the success of business models like that of Zhong An. These factors will likely be necessary preconditions for African insurers and platforms to replicate success in scaling operations.

Platforms have started offering insurance in Africa, but policies are usually embedded and only valid as long as the service or asset is used.

Our preliminary analysis of the 283 unique platforms identified by i2i show that 16 offer an insurance product, and in 12 of these cases we found that the insurance product was embedded rather than being offered as a voluntary add-on.

Many of the platforms which match consumers to providers of asset-sharing services (rental of cars, homes, etc.) have embedded liability products, which are only valid during the period that the asset is being shared. Rent my ride, a motor-vehicle sharing platform in South Africa, has embedded insurance coverage that provides up to 365 000 USD liability cover that is valid while the car is rented out.Insurance products offered by freelance platforms, which connect employers to freelance workers, are often embedded. Paydesk, a marketplace where publishers, editors and broadcasters find, book and hire professional news-gathering services, offers accidental death and disablement coverage for platform workers during the time they are working for the user. SweepSouth, a platform in South Africa that allows users to book cleaning services within seconds, has recently partnered with Simply (an InsurTech[2]) to provide basic accidental death and disability cover at no cost to SweepSouth’s domestic cleaners. Kobo360, a logistics and courier platform that connects drivers and owners of trucks with companies who want to transport their goods in Nigeria has an embedded insurance product which covers goods from point of pick-up to point of drop-off. Another logistics on-demand service in Nigeria, ShapShap, gives the user of the platform the choice to insure the good that they are having delivered. Jumia, one of Africa’s biggest online shopping platforms, is one of the few platforms to offer voluntary insurance products. Jumia partnered with the insurance company AXA Mansard to offer device protection, health and life insurance products in Nigeria. These insurance products are sold as add-on’s and can be simply added to a consumer’s online shopping basket and paid for either online or in cash. Although many of the current insurance offerings on digital platforms in Africa, are embedded or are only valid during the time that the service or asset is being used, it is still encouraging to see African platforms and insurers working together to mitigate some of the risks that their users face.

There is a clear business case for insurers to partner with digital platforms.

The insurance industry in Africa is built on the traditional style of doing insurance, in which the insurance provider designs the product and sells it to the consumer through brokers and agents. This traditional process of selling insurance products is often inefficient and has become increasingly unsustainable, in our view.

Africa has seen some innovation in distribution with the emergence of Technical Service Providers (TSPs) like MicroEnsure who partner with mobile network operators (MNOs) and insurers to distribute products. However, insurance markets in Africa are still underdeveloped with distribution channels remaining quite traditional and retail products undiversified, thereby inhibiting coverage to low-income consumer segments. Partnering with digital platforms may be one way that insurers can move beyond traditional insurance models and start to target new segments of the population like microworkers and online merchants. There are clear incentives for insurance providers to partner with digital platforms to offer insurance products as they already have a customer base, a myriad of data on their customers and understand their behaviour. However, for insurance products on platforms to reach scale and provide value to consumers, they need to be designed for the local context of the market and the needs of platform participants.

We are optimistic that digital platforms will not simply be MNOs 2.0.

MNOs are cost effective distribution channels for insurance that have achieved dramatic scale but with questions on value. We believe digital platforms may have some advantages over MNOs. Insurance distributed through MNOs started as embedded loyalty products, which traditionally addressed the (non-insurance) needs of the MNO as opposed those of the consumer. While mobile insurance has transitioned into paid, opt-in models, products remain geared to the incentives of the MNO. Products distributed through MNOs are generally microinsurance products meant for low-income clients, whereas products distributed through digital platforms have the potential to reach a much wider and diverse group of individuals.

Part of MNOs’ success as distributors of insurance is built on their ability to combine trust with the payments mechanisms of airtime deductions and mobile money. Like MNOs, digital platforms can leverage the trust they have established with their participants to offer insurance. However, unlike MNOs, digital platforms offer a wide variety of payments mechanisms: credit/debit card, mobile payments, digital wallets, bank transfer, paypal and cash.We are optimistic about digital platforms because they offer more opportunities to insert risk management and mitigation into a wider set of economic transactions and participants than is possible through MNOs. Unlike MNOs, digital platforms aggregate MSMEs in ways that has not been possible in the past and are making them both visible and part of the digital economy. The incentives of platforms are more likely to be aligned with the platform participants and thus they are more likely ensure that products are designed to meet actual needs and thus value is delivered.

Get in touch with us!

i2i is conducting research on the role of African digital platforms and the future of financial products. For more information, please contact Chernay Johnson at chernay[at]i2ifacility.org. Cenfri’s RRI programme is conducting thematic research on platforms that offer insurance products  or want to offer insurance products and is looking to partner with platforms and insurers who are interested in further exploring this concept. For more information, please contact Kate Rinehart at kate@cenfri.org.Join the conversation by following #AfricanDigitalPlatforms[1] We define a multi-sided platform (MSP) as a virtual space that derives value from facilitating direct interactions between consumers and providers. For example, the platform Uber Eats can be considered a product platform and a service platform, as it connects participants across three sides of the platform: the consumer of food is matched with a restaurant (which supplies a good) and a delivery agent (which supplies a service), i.e. the Uber driver.[2] InsurTech is “defined as an insurance company, intermediary or insurance value chain segment specialist utilising technology to either compete or provide valued-added benefits to the insurance industry” (Sia Partners, 2016).

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About the Authors

Kate Rinehart is a Senior Reasearch Analyst at Cenfri. Since joining Cenfri in 2016, Kate has been involved in projects spanning several thematic areas, including: The potential of insurance to contribute to inclusive growth / The use of data in financial service providers’ decision-making / Using data to inform rural agent management strategies / Behavioural interventions that advance financial inclusion / DataHack4FI / What drives consumers to use financial services. Prior to Cenfri, Kate worked as a programme coordinator for Truelift, a global trust mark that signifies commitment to enduring change for people affected by poverty. Before that, she helped design and launch a pilot study on child trafficking with Seva Mandir and Child Fund in Udaipur, India; and she worked on a mobile health technology project in Haiti, with the University of Texas Health Centre.

Doubell Chamberlain is the founder and managing director of Cenfri. He has extensive experience in microinsurance, AML/CFT, distribution of financial services and regulatory framework design. He is also a leader in conceptualising diagnostic methodology and employing the diagnostic tool to answer real policy questions and to formulate evidence-based, consultative market development strategies. Doubell has worked extensively across the developing world, including Africa, Latin America, South Asia and Southeast Asia. He is also the chairperson of the governing board of the Microinsurance Network (MiN). Doubell is a development economist by training and a specialist in financial inclusion innovation, financial sector policy and regulatory strategy for development, access to financial services and making markets work for low-income individuals.

Chernay Johnson is an Engagement Manager in the Client Insights division of insight2impact, a global resource centre established by Cenfri and FinMark Trust to improve financial inclusion through the smarter use of data. She concurrently serves as a Governance Committee member of the Bureau for Economic Research (BER) in a non-remunerative capacity. Prior to joining Cenfri, Chernay worked as a professional economist at the South African Reserve Bank (SARB), Credit Suisse Securities, and spent time consulting on a strategic capital-markets project as a visiting researcher to the Johannesburg Stock Exchange (JSE) and Capital Markets Cooperative Research Centre (CMCRC) in Sydney. In recognition of her impactful economic research on sub-Saharan Africa, the Financial Mail ranked her as one of the top three young analysts in South Africa in 2016.

Do migrant remittances contribute to a decline in the level of malnutrition in Sub-Saharan Africa?

18.02.2019Hamed Sambo, PhD Researcher, Paris XIII University

Despite efforts by international organizations, governments and NGOs, malnutrition is still a major concern in most Sub-Saharan African countries. According to FAO statistics, 25% of the region's population is under-nourished, that is, one in four people. Though there are many factors responsible for this situation, poverty however remains the main determining factor.

Faced with this situation, more and more Sub-Saharan African households are adopting migration as a survival strategy. In this regard, a member of a household will therefore agree with other members of the household to migrate to a country or locality that has better employment prospects. In return, the migrant will remit funds and / or goods to the household, which will decide to either spend the remittances for consumption purposes, children's education, healthcare, or on creating a business.

In Sub-Saharan Africa, the use of migrant remittances differs from one country to another. However, studies in several countries in the region show that most households spend money on consumption, which includes purchases of food and other goods, as well as payment for services (rent, transportation, etc.). According to a study conducted by the BCEAO in 2010, more than half of the remittances received in the WAEMU zone were spent on consumption, compared with 21% for investment, and only 3.4% on education and 6.4% on health. For example, in Senegal, 70% of migrant remittances were for consumption. In the same year, the World Bank conducted a study in three East African countries - Uganda, Ethiopia and Kenya. While in Uganda and Kenya, households use a large portion of the remittances to invest in small businesses, in Ethiopia, the remittances are destined for consumption.

If greater part of migrant remittances are devoted to consumption in most Sub-Saharan African countries, do they contribute significantly to a decrease in malnutrition in the region?

The answer to this question is more complex than it seems. Migrant remittances help to improve nutrition in most receiving countries. However, the number of households who see their food situation improve remains very limited. Several reasons account for this low impact.

Migration is not for everyone. Indeed, because of the costs involved in migration (costs related to access to information, visas, transport...), people from poor families are less likely to migrate compared to those whose families belong to the middle class. As a result, poor families do not only have few migrants, they also receive less migrant remittances compared to middle-class families, whereas, it is the poor who suffer the most from malnutrition. It therefore emerges that the overall decline in malnutrition in the countries as a result of migrant remittances is limited.

It all depends on what is consumed. While studies show that in most Sub-Saharan African countries the remittances are for purchases, some households prefer to buy luxury goods or goods for weddings and ceremonies. The fact that food expenditure accounts for only part of overall purchases also limits the overall impact of remittances on the level of malnutrition. In addition, the foods provided are, for the most part, those with a better taste. These foods are purchased at the expense of foods rich in nutrients, which has the effect of further reducing the impact of remittances on food.

Cultural habits also constitute a constraint. In some localities, it is rather the cultural habits that prevent the population from getting rid of foods whose nutritional value is low. Remittances therefore have little or no impact on the diet of receiving families in these localities because they hardly change their feeding habits.

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About the Author

Hamed Sambo is currently a PhD Researcher at the University of Paris 13. His main research topics are migration, remittances, and food security in developing countries. During the first year of his PhD, he completed an internship at the African Development Bank (AfDB) during which he worked on gender issues. Hamed holds a statistics engineer’s degree at National School of Statistics and Applied Economics (ENSEA) of Abidjan, and a Master’s degree in Economics and international finance at the University of Paris 13 – Sorbonne Paris Cité.

Gravatar: Maram Ahmed, Visiting Fellow, School of Oriental and African Studies (SOAS)

How the African landscape could benefit from Islamic Finance

04.02.2019Maram Ahmed, Visiting Fellow, School of Oriental and African Studies (SOAS)

Infrastructure is one of the most important drivers of economic growth and reaps numerous socioeconomic benefits. In 2018, a report published by the Boston Consulting Group and Africa Finance Corporation estimated an annual infrastructure investment gap of US$100 billion in sub-Saharan Africa that is expected to increase. Infrastructure impacts a number of the UN's Sustainable Development Goals(SDGs) directly such as SDG 9 - "build resilient infrastructure, promote inclusive and sustainable industrialization, and foster innovation" as well as indirectly such as SDG 7 "affordable and clean energy"and SDG 11 "sustainable cities and communities". Achievement of the goals requires a large amount of investment and governments alone cannot foot the bill.

In Africa, a substantial level of investment is needed for both hard infrastructure (such as bridges, roads and transportation links) as well as soft infrastructure (building of institutions such as schools and hospitals) moreover, two important challenges remain.

Firstly, rapid urbanization that is taking place throughout Africa as more citizens are moving into the cities increasing the demand for infrastructure and in particular housing. Secondly, the continent has a high number of landlocked countries making some countries increasingly dependent on the infrastructure of their neighbors.

Although commodity prices are rising, now is the time for African policymakers to prioritize attracting foreign direct investment and diversifying their sources of financing. One way the continent can do that is by tapping and leveraging the use of Islamic Finance, a market valued to reach $3 trillion in total assets by 2020.

Islamic Finance in Africa:

The continent is home to a quarter of the world's Muslims, and there are a number of Islamic banks operating throughout Africa. However, the development of Islamic finance in sub-Saharan Africa is low in comparison to other regions.

African countries such as Morocco, Senegal and South Africa have in the past funded infrastructure projects using Islamic finance through the issuance of Sukuk, a Shari'ah compliant debt capital market instrument. If mobilized well, Sukuk financing has great potential to fund much-needed infrastructure projects throughout Africa. In 2017 alone, Sukuk issuance volume reached $97.9 billion, a 45.3% increase from the year before and the continent is well positioned to attract further investment through increasing the number of Sukuk issued by Sovereigns and corporates alike.

South Africa's Sovereign Sukuk

In September 2014, the Republic of South Africa successfully issued its inaugural USD$500 million 5.75-year Sukuk with a coupon rate of 3.90%. The Sukuk was listed on the Luxembourg Stock Exchange and the proceeds raised were used to fund infrastructure development as according to the South African National Treasury, "The decision to issue an Islamic bond has been informed by a drive to broaden the investor base and to set a benchmark for state-owned companies seeking diversified sources of funding for infrastructure development."

However, in order to issue the Sukuk, the Government had to make amendments to its legislation and tax laws signifying how crucial political will is to removing obstacles and facilitating the diversification of funding sources. The debut Sukuk was more than 4 times oversubscribed demonstrating strong appetite and investor confidence in South Africa with an overwhelming 84% of investors being from the Middle East and Asia.

Three key lessons can be learnt from the South African Sukuk issue.

Firstly, the government was able to diversify its funding sources and tap a new investor base. Prior to issuing the Sukuk, the government issued a dual-tranche conventional bond in July earlier that year, the majority of the investors, 81% to be precise, were from the US and Europe unlike the Sukuk investors who were predominately from the Middle East and Asia. The government was able to tap a new pool of investors and diversify their investor base.

Secondly, the importance of creating a conducive regulatory environment. With the changes being made to domestic legislation, the government was able to issue a Sukuk in-line with the Shari'ah (Islamic law) on the international capital markets.

Lastly, showing that Sukuk are a viable funding tool for infrastructure financing. As stated by the National Treasury, one of the driving factors to issue a Sukuk was to set a benchmark for state-owned enterprises looking for infrastructure funding. As South Africa's infrastructure needs increase with its growing population, the Government needs to consider alternative financial instruments to fund the country's infrastructure needs of which Sukuk are well suited for.

Looking ahead

Sound and stable infrastructure is an important component of economic development as it helps facilitate trade, improves well-being and creates jobs.

With the tightening of government budgets, African governments cannot finance infrastructure development alone and need to explore alternative sources of financing and one way is through leveraging the use of Islamic finance, in particular Sukuk financing.

Having said that, Islamic finance is in no way a panacea but rather an underutilized tool and there is vast potential in mobilizing the industry to help develop the continents skyline. However, the nuances of the continent need to be taken into consideration given the differing financial and legal systems, therefore there is no uniform approach.

The challenge remains to attract foreign investors so policymakers need to prioritize creating an environment that both attracts and protects investors. South Africa is an example of how a Government can overcome these obstacles.

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About the Author

Maram Ahmed is an advisor and researcher with a focus on emerging markets. Maram is currently a Visiting Fellow at SOAS, University of London, a leading institution for the study of the Asia, Africa and the Middle East. At SOAS, Maram teaches Corporate Governance, Finance in the Middle East & North Africa and Islamic Banking & Finance. Maram’s current research interests include sustainable development, governance, humanitarian financing and women’s empowerment. She is recognized as an expert in Islamic Finance and has authored numerous articles in top academic journals.

Gravatar: The MFW4A Secretariat

A message from the Making Finance Work for Africa Secretariat

21.01.2019The MFW4A Secretariat

Dear readers,

On behalf of the entire Making Finance Work for Africa (MFW4A) team, we would like to wish you all a happy and prosperous new year 2019. We would like to take this opportunity to highlight our 2018 achievements, and also to present our program for this new year.

Last year was the beginning of our new triennial strategy 2018-2020. To continue to be the reference platform for advocacy, knowledge sharing and cooperation on financial sector development in Africa, we have identified three key objectives: (i)  to strengthen our value proposition and financial sustainability, (ii) to expand membership and (iii) to sharpen our focus to short, medium and long-term outcomes. Our new strategy has already started to bear fruit with Afreximbank joining the MFW4A Partnership as the first African financial institution.

Our work in supporting a strong and stable African financial sector continued in 2018. MFW4A organized a series of financial sector dialogues in collaboration with the African Development Bank (ADB), covering the five (5) regions of the continent. Those high-level events provided a a platform for the African financial sector to take stock of the progress and identify future priority actions through a common roadmap. Over 130 participants from central banks, ministries, regulators, and the private sector have been mobilized for the first two editions dedicated to West, Southern, and East Africa. Central and Northern Africa financial sector dialogues are scheduled for the first quarter of 2019.

Our work in supporting remittances and diaspora investment led to the delivery of two studies funded by the Migration and Development Fund. The first, “A Systematic Approach to Supporting Diaspora Investment in Africa” led to the design of a toolkit that can be used by a range of stakeholders to undertake develop diaspora investment projects . A second study explored “The Risks and Opportunities of Digitization on the Remittances Market in the WAEMU and CEMAC zones”. Both studies will be published in both English and French in February 2019.

Long-term finance remains a key priority for MFW4A. During the first African Investment Forum (AIF) held in Johannesburg, MFW4A participated as a Knowledge and Research Partner and co-led the Institutional Investors work stream, mobilizing local institutional investors to the forum to discuss issues of the highest relevance, including on investment strategies, de-risking and the regulatory environment.

2018 has also been a year where a new work stream has been introduced. MFW4A launched a Trade Finance initiative with the support of the African Development Bank and the German Development Agency (GIZ), with the objectives of improving market knowledge and capacities of actors, overcoming regulatory obstacles, and reducing risks related to operations with international banks, in order to stimulate trade finance on the continent. Under this initiative and in collaboration with ADB and the International Trade Finance Corporation (ITFC), we delivered a capacity building program intended for 35 African countries and over 500 specialists operating in more than 200 local banks.

Lastly, we will continue to leverage our network to support the data collection process under the Africa Long-term Finance Initiative.  A country diagnostic and a scorecard for Côte d’Ivoire are expected to be completed in 2019.

In closing, I would like to extend my sincere appreciation to all our funding partners, stakeholders and supporters for your unwavering support. We look forward to your continued collaboration.

With our best wishes for 2019.

The MFW4A Secretariat

ABOUT THE AFF

What do renowned economists, financial sector practitioners, academics, and activists think about current issues of financial sector development in Africa? Find out on the blog - and share your point of view with us!

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The State of SME Banking in AfricaJ-P Stijns, Economist, EIB & A. Pelletier, Lecturer, Goldsmith U. of London
The potential of digital platforms as distributors and...Kate Rinehart, Chernay Johnson & Doubell Chamberlain - CENFRI
Do migrant remittances contribute to a decline in the level...Hamed Sambo, PhD Researcher, Paris XIII University

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