Financial Sector Development in Africa: Opportunities ... - World Bank

CHAPTER 6
The Potential of Pro-Market
Activism for Finance in Africa:
A Political Economy Perspective
Florence Dafe
How can governments in the political and economic environments typical
of Sub-Saharan Africa intervene to increase the financial resources
available for productive investment? This is the question that drives this
chapter. The policy relevance of research on this question is widely
acknowledged: there is strong empirical evidence that an efficient and
inclusive financial system is essential for private investment, and ultimately
for economic growth. 1 However, the majority of African financial
systems are highly exclusive: in Africa, 2 more enterprises than in any
other part of the world report that access to finance is a major constraint
to their operations. Particularly small and medium enterprises (SMEs)
This chapter draws on a paper written within a wider research project on the political economy
of financial reforms in Africa, commissioned and funded by the Deutsche Gesellschaft
für Internationale Zusammenarbeit (GIZ). The views expressed in this chapter are those of
the author alone and do not necessarily represent the views of GIZ. This paper has gone
through a major rewrite in response to helpful comments from Kathrin Berensmann,
Christian von Haldenwang, Matthias Krause, and Mick Moore. Special thanks are due to
Karen Losse, Thomas Losse-Müller, Christian von Drachenfels, and Peter Wolff for valuable
comments on earlier drafts.
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