Microfinance Investment in Sub-Saharan Africa

01 June 2012

The 48 countries of sub-Saharan Africa (SSA) represent 14 percent of the world's population and include seven of the 10 fastest growing nations in the world: the Democratic Republic of Congo (DRC), Ethiopia, Ghana, Mozambique, Nigeria, Tanzania, and Zambia. Overall, SSA is stabilizing and growing, with fewer conflicts and banking crises since the 1990s and early 2000 (Beck, Maimbo, Faye, and Triki 2011) and more foreign direct investment (FDI) flows. FDI inflows to the region rose from $23 billion in 2006 to $38 billion in 2010, according to the UNCTAD statistics database. The increase is due to a number of factors, including consistent gross domestic product growth rates, increased political stability, a growing middle class, and reforms that reduce barriers to entry (World Bank 2011).

Yet despite healthy economic prospects, the region has the lowest share of banked households in the world (12 percent) and the highest share of poor people, with 50 percent of the population living on $1.25 a day or less (CGAP and World Bank 2010). More work needs to be done to expand financial access, and many governments and international funders are keen to contribute. Equity and debt capital continues to be important in developing financial services for low-income populations in the region.