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

4 Beck and Maimbo
advocate a “building block” approach to defining reform roadmaps for
regulatory and supervisory reform. Although Africa has escaped the direct
impact of the global financial crisis, the authors point to several weaknesses
in local financial systems that must be addressed, including gaps in regulatory
frameworks and governance deficiencies. While many countries have
committed to moving from Basel I to Basel II in spite of limited implementation
capacity, most of the measures proposed under Basel III are of limited
immediate relevance to African banking sectors, since the weaknesses
they address are largely a result of regulatory philosophies and market
practice in developed markets. An increasingly important challenge will be
the regulation and supervision of cross-border banks and the cooperation
that this requires across the continent.
Part IV: Financial Sector Reform:
Activism and Local Political Conditions
Finance in Africa does not suffer from a lack of solutions, but from a lack
of implementation. In Financing Africa, we advocate replacing the best
practice with the best-fit approach. In chapter 6, the final chapter of this
volume, Florence Dafe discusses the politics of financial sector reform in
Africa and, more specifically, the space needed for an activist role for
government to help create the markets and coordination mechanisms
necessary for financial markets to deepen and broaden. How can
governments in the political and economic environments typical of Africa
intervene to increase the financial resources available for productive
investment? The author describes the development that has occurred
over the past decades, from market-replacing activist policies through the
abandonment of government intervention in favor of modernist strategies
toward a pro-market activist role of government. She points to politics as
a key determinant of the effectiveness of government interventions and
stresses critical differences between East Asia and Africa that can explain
why government was more successful in its interventions in the former
than the latter. Finally, she provides a framework for evaluating the conditions
under which activist policies can work without being captured by
incumbent elites for their own socioeconomic interests.
Note
1. Beck, T., S. Munzele Maimbo, I. Faye, and T. Triki. 2011. Financing Africa:
Through the Crisis and Beyond. Washington, DC: International Bank for
Reconstruction and Development/World Bank.