Sub-Saharan Africa

Overview

Home to more than 780 million people, Africa is a diverse region in terms of history, culture, languages, economic prospects, and political systems. Africa faces many challenges. Between 1996 and 2005, Africa's poverty rate declined by 7%. Countries such as Burkina Faso, Uganda, Tanzania, and Mozambique, have experienced strong recent economic growth and a corresponding rapid decline in their poverty levels. Yet 50% of the regional population remains below the poverty line, and the depth of poverty is greater in Africa than in other regions. After strong economic growth in many African countries through 2008, the global economic slowdown, credit crunch, and lower commodity prices affected the region in 2009. Economic prospects in Sub-Saharan Africa are slowing with regional growth expected to be just over 3% for 2009, down from earlier projections of 6%. 

Africa continues to pursue reforms to accelerate progress in human development, improve infrastructure and strengthen governance. Additionally, Africa is receiving renewed attention from the private sector, funders, domestic and international investors, and development agencies.

Access to financial services contributes to economic growth and poverty alleviation. Currently, however, only 1 in 5 households has access to financial services in Sub-Saharan Africa. In 2008, the 195 African MFIs registered on the global MIX Market database, reported more than 6.5 million borrowers and 16.6 million savers. Over the past five years, the African microfinance sector has evolved rapidly in several countries. A wide range of institutional types are developing including NGOs, financial cooperatives and credit unions, rural banks, associations, non-bank financial institutions, microfinance banks, postal and savings banks, and commercial banks. This broad institutional diversification enables more competition and promotes better services for clients. In addition, new players such as mobile phone operators are launching mobile banking through phones, ATMs, points of service (PoS), and agent networks.

However, there are several challenges facing the sector:

• With increasing competition, MFIs need to deepen their outreach, strengthen their capacity, be increasingly transparent with their clients, investors and supervisors, and ensure profitability.
• Financial infrastructure is still lacking, and further progress is needed on payment systems and credit bureaus.
• Governments are increasingly recognizing the importance of access to formal financial services as a key component to economic development. Microfinance regulatory and supervisory frameworks have been revised in many countries, and work is underway in the remaining countries. However, growth in the microfinance sector will strain supervisory capacity in many countries.
• Only a few countries have taken steps towards adequate consumer protection, and MFIs need to be proactive in providing their clients with relevant transparency information.
  

Deepening Access to Financial Services in Africa

In this context, CGAP seeks to expand the depth, quality, and outreach of financial services in Sub-Saharan Africa by building on existing CGAP activities, funder member initiatives, and new partnerships.

Our work is divided into four levels:

• promoting aid effectiveness
• fostering conducive policy environments
• supporting financial sector infrastructure and financial transparency
• strengthening retail institutions

CGAP focuses primarily on its comparative strengths in funder coordination, advisory services for governments and Central Banks, and promoting transparency and improved financial infrastructure. We will continue to ensure that CGAP activities are coordinated with other actors whenever possible.