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

Introduction 3
challenges—loom even more prominently in agricultural and rural
finance than in other sectors. Fostering competition and the adoption of
technology-driven financial innovation is thus even more important in
agriculture than it is in other sectors. The authors show how agribusiness,
rural banks and credit unions, and small agricultural producers can adopt
tactical solutions to catalyze the power of big commercial banks and
private investors. They provide several examples of successful innovation
in the region that involved new products and new providers, new delivery
channels, and new connections among different segments of the financial
system and the agricultural sector. However, they also point out that
finance is only part of the solution and note that other major challenges
in the policy and business environments and supporting infrastructure
still remain to be overcome.
Part II: Lengthening Contracts
The challenges in long-term finance loom as large as those involved in
expanding the outreach of the financial system. Africa faces many longterm
investment needs, but lacks the necessary resources, markets, and
products to satisfy these needs. This part of the book takes a detailed look
at one of the areas where long-term finance is needed—housing finance.
In chapter 4, Simon Walley takes stock of housing finance in Africa. He
documents the sizable need for additional housing in many African countries,
based on these countries’ continuous population growth and an
ongoing urbanization trend. The current lack of housing finance has contributed
to the urban sprawl with largely informal, poor-quality housing.
He describes different housing finance regimes across Africa, their funding
structure, and their refinancing schemes. He points to the major
constraints for expanding housing finance in Africa: the lack of affordable
housing, the lack of capacity and the high risk aversion of lenders, the
adverse macroeconomic environment, and the lack of land titling.
Part III: Safeguarding Finance
As African financial systems deepen and broaden, new challenges arise for
regulators and supervisors across Africa. In chapter 5, Michael Fuchs,
Thomas Losse-Mueller, and Mikaio Witte discuss the repercussions of
regulatory reforms in Europe and North America for African regulators as
well as local challenges. They compare and contrast key elements of the
international reform discussion with the priorities for reform in Africa and