Abstract
This study takes stock of progress made so far in the financial sectors of sub-saharan African countries. It recommends further reforms and specific measures in the areas of supervision, development of monetary operations and financial markets, external sector liberalization, central bank autonomy and accountability, payments system, and central bank accounting and auditing.
Abstract
The countries of sub-Saharan Africa have witnessed a distinct improvement in their economic performance in recent years, with increasing growth rates, declining inflation, and narrowing financial imbalances. The improvement is attributable in large part to the implementation of sound economic, fiscal, and financial policies, including policies to liberalize trade and improve the investment climate. In addition, these countries embarked on fundamental structural reform.
Abstract
In virtually all African countries, formal banking began with the establishment or arrival of “colonial” banks, owned by investors from the metropolitan country or from South Africa. These banks offered banking services to colonial enterprises, both those that developed the agricultural cash crop and extractive businesses and those that provided local services, such as oil, retailing, and equipment. They also provided banking services to the manufacturing sector in those countries where one emerged, that is, principally in Kenya, Nigeria, South Africa, and Zimbabwe. These banks also offered branch networks that provided savings, money transfers, and some credit facilities to small businesses, salaried employees, and similar borrowers. They did not penetrate the subsistence agricultural sector.
Abstract
Like other aspects of the financial sector in sub-Saharan Africa, supervision was a late arrival. In some respects, this is not surprising; banking in this region had been dominated by foreign banks (even at the retail/consumer level) since the beginning and subsequently also by government-owned institutions. The former are largely the responsibility of home-country supervisors and the latter, of their principal shareholders. As a result, there was not a great need for supervision. More recently, the departure, in whole or in part, of some of the foreign-owned institutions and the privatization of some of the government-owned banks, together with the opening up of the financial sector to new investors, radically changed the operating environment. More-over, weak macroeconomic performance, or even simply greater reliance on market mechanisms for macroeconomic policy, led to much greater volatility in financial markets and institutions, which exposed latent weaknesses in the banking systems of Africa.
Abstract
In the early stages of economic development, central banks typically rely on direct instruments of monetary policy, notably credit controls and controls on interest rates. With these instruments, they attempt to control directly the balance sheets of commercial banks. When countries move to a market-based system, central banks rely on indirect instruments to influence the level of bank reserves through financial markets. The main indirect instruments are reserve requirements, lending facilities such as a rediscount facility or a Lombard facility, and open market operations. With indirect instruments, central banks influence the levels of bank reserves by buying and selling securities, particularly government or central bank securities. In the beginning stages, before financial markets are active and deep, it is generally necessary to rely on “open market–type” instruments, such as auctions of treasury bills. Later, when a secondary market develops, central banks can buy and sell securities either outright or through the use of repurchase (repo) and reverse repurchase (reverse repo) agreements.9