Recent Economic and Social Developments

Africa is the second fastest growing region in the world, estimated to have grown 3.4% in 2019.

COVID-19 pandemic will impact growth to decelerate to between 1.8% and -4.1% in 2020.

Growth in Africa is projected to rebound to 5% in 2021, supported by response measures and global recovery.

The Private Sector in Africa

For 2020–2030, the private sector is expected to play a primary role as the engine of growth in Africa.

The absence of a sound eco-system can impede firms of all sizes, depending on their growth cycle.

African economies should explore innovative financing for the private sector for recovery and SDG progress.

Financing from the Corporate Banking Sector

Most financing mechanisms in Africa are bank-based, and banks are a major source of innovative financing.

The retail and corporate banking sector in Africa holds more than 90% of the assets in the financial sector.

Over the past 20 years, the banking sector has changed fundamentally in many African economies.

The Potential of African Markets

African financial markets are small and undeveloped, largely dominated by commercial banks.

The underdevelopment financial systems constricts credit for firms, especially small and medium sized.

AfCFTA provides great opportunities for African capital markets to expand and attract more investment.

Long-term Financing for Sustainable Development

A central challenge for Africa to meet the SDGs and achieve sustainable and inclusive development is...

...to mobilize investment for key sectors such as health, education, energy, transport, construction, agriculture.

The cost to achieve the SDGs by 2030 in Africa is estimated at about $1.3 trillion a year.

Global Innovations in Financial Technology

Financial technology (fintech) refers to a broad range of innovations that enhance or change financial services.

Fintech seeks to improve speed, security and operating costs to democratize financial markets.

The global fintech revolution is expected to triple access to financial services in Africa.

Regulations to Support Financing

African countries need to regulate their bank sector to limit the possible harm from banking crises.

Africa needs to rethink its financial services regulation so that innovation is fully functional.

Any recommendations on Africa must take into account the narrow resources African countries provide.

KEY MESSAGE 1

Financing innovations can arise from multiple sources simultaneously. Businesses need to consider leveraging the different sources according to their financing needs.

KEY MESSAGE 2

A transparent and effective regulatory institution is mandatory for minimizing risk and overseeing the financial operations of firms and peer institutions.

KEY MESSAGE 3

Third, the absence of a sound eco-system can impede firms even when financing is readily available. The AfCFTA aims to play an important role in enhancing the eco-system for firms and connecting local firms to regional and global value-chains.

KEY MESSAGE 4

Fourth, innovative financing of the private sector and business growth generates firm value added, gainful employment, tax revenue for government, stable investment returns for entrepreneurs and the growth of financial institutions.

KEY MESSAGE 5

The transformation from innovative financing and a fully operational financial sector to firm growth and so to economic growth, lower inequality and reduced poverty is long term and necessarily involves feedback mechanisms.

The COVID-19 global pandemic is expected to expand the use of fintech, including mobile money.

Globally, government lockdowns have led to a 24–32% increase in daily downloads of mobile finance applications in 74 countries sampled.

Fintech can provide alternatives and revolutionize access to finance, increasing activity during COVID-19.

The end of the pandemic is uncertain, but African governments must explore policy measures to stabilize the financial system and enable funding of the private sector.