People’s access to financial services in sub-Saharan African countries still trails behind impactful economic and political reforms in the region, according to the latest market update from the Institute of Chartered Accountants in England and Wales (ICAEW).
High borrowing costs in West Africa due to governments’ struggles to adjust fiscal and monetary policy to low oil prices is a prevalent cause, one of several explored in ICAEW’s Economic Insight quarterly on Africa, a report that examines potential impacts of various fluctuations in the cost of financing on the continent’s economic development.
Michael Armstrong, regional director of ICAEW for the Middle East, Africa and South Asia, said that while a portion of sub-Saharan Africa’s population participates in a formal banking system, individuals in low income communities are granted only minimal access, “especially when considering the limited availability of private credit”.
“This could have real effects on economic growth if it remains unchanged,” he added.
The Rwandan government has made significant improvements towards financial inclusion, including improvements in market capitalisation and asset quality in 2016, following six major economic reforms since the end of the 1990s.
Rwanda stimulated economic growth of around 8 percent from 2001 to as recently as 2014. A new generation of entrepreneurs is also emerging in the country, as reported by Development Finance after graduates from Kigali Independent University succeeded in pooling savings of 100 Rwandan Francs (US$0.12) a day to create a thriving microfinance institution with a capital base of US$200,000 in just six years.
World Bank’s Doing Business 2017 – Equal Opportunity for All report also ranks Rwanda second within Africa, after Mauritius.
But while the ICAEW documents additional achievements in extending financial services to citizens in Zambia, Botswana, Namibia, Kenya, Ghana, Mauritius and Uganda, economic risks stemming largely from a lack of economy diversification in West Africa, remain high in comparison to other emerging economies.