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Financial Sector

What the Global Findex Database says about Africa

Asli Demirgüç-Kunt's picture

With the recent opening of a rural savings and credit cooperative, the people in Gebremichael’s Ethiopian village no longer have to save their money in pots or under the mattress at home. He and his neighbors are learning to use formal savings and credit systems.

We know that many in Sub-Saharan Africa have benefited from using the formal financial system, but exactly how many are using it to save, borrow, make payments and manage risk? 

With the release of the Global Financial Inclusion Indicators (Global Findex) we now have a comprehensive, individual-level, and publicly-available database that allows comparisons across 148 economies of how adults around the world manage their daily finances and plan for the future. The Global Findex database also identifies barriers to financial inclusion, such as cost, travel time, distance, amount of paper work, and income inequality.  Our new Working Paper offers an overview of Financial Inclusion in Africa.

Do small countries do it better?

Apurva Sanghi's picture

In development circles, people talk about “countries that are too big to fail and too small to succeed”.  The jury may be out on the former but a new book by Shahid Yusuf and Kaoru Nabeshima, “Some Small Countries Do It Better” dispels the notion that countries can be too small to succeed.

Three small countries studied in the book - SIFIRE (SIngapore, FInland, IREland) – not only grew at high rates but were able to sustain them.

The book – which concludes with a section on implications for African countries – contends that growth recipes for SIFIRE were not tightly bound to the East Asian model of extremely high rates of savings and investment (although arguably, Singapore was in many ways the epitome of that model, thanks to its mandatory savings scheme which led to gross national savings in the neighborhood of 50 percent for decades).

The larger point is that these three countries augmented physical investment with healthy doses human capital and knowledge; by “opening their windows and letting it [knowledge in various forms, for example, that embodied in FDI] stream in”. And even though the book does not explicitly discuss it, they did so without massive infusions of foreign aid. Or perhaps it was the lack of aid that forced them to be nimble, agile, and forward-looking?

What precisely did SIFIRE get right? 

Can Kenya replicate Indonesia’s turnaround?

Wolfgang Fengler's picture

JakartaRecently, a friend from Indonesia visited me in Nairobi. He is one of the world’s leading experts on social development and a long-term Jakarta resident. One of his observations stuck in my mind: “Kenya is just like Indonesia ten years ago”, he said. 

Comparing Kenya with Indonesia is counterintuitive—except perhaps when it comes to traffic jams—because of the many differences between the two countries. Indonesia is the world largest island state with more than 17.000 islands and a demographic heavyweight with 240 million people (six times more than Kenya). It is also 85 percent Muslim, while Kenya is about 85 percent Christian. Indonesia has massive natural resources – coal and gas (and some oil) – that it exports to other Asian countries, especially China, while Kenya’s economy is fuelled by a strong service sector.

There are many more reasons to challenge a comparison between these two countries but when one digs below the surface, there are also some similarities. Economically my friend was spot on: in GDP per capita terms, Kenya is roughly at the level of Indonesia a decade ago (about US$800 per capita). Today Indonesia is far ahead, but I don’t see any reason why Kenya couldn’t follow suit. Indeed, Indonesia is a good benchmark case for Kenya because it was never a “star reformer”, but instead a consistently strong performer.

About Development Economics

Shanta Devarajan's picture

UPDATE (May 15th, 2012) Caroline Freund, World Bank Chief Economist for the Middle East and North Africa has joined the debate. See her remarks.

The Chief Economists of all the regions where the World Bank implements programs got together recently to exchange thoughts about the current state of development economics.

You can read a summary of our views related to Africa, South Asia, and Europe and Central Asia here. 

And we hope you can participate in this debate by sharing your own views via the comments section below.  

Tanzania: Building bridges through education and small businesses

Jacques Morisset's picture

Attracted by the prospects of large unexploited natural gas reserves in the south of Tanzania, big players are in town. The British Gas Group has publicly announced that it may invest over US$35 billion in the next 25 years – 1.5 times Tanzania’s current GDP. Policymakers and donors are jockeying to position themselves and understand what is at stake.

The excitement is well founded but perhaps a little bit premature. According to the most optimistic projections, revenues from natural gas will not materialize for 5-7 years. Moreover, international experience shows that commodity-driven growth does not guarantee success. The Tanzanian authorities are therefore right to prepare for the future by setting up the fiscal and financial rules required for future transparent and rational use of these funds now. They should not forget also to focus on the coming 5-7 years because the economy is facing a number of challenges.

The effects of the Euro zone crisis on the CFA franc zone: a View from Cameroon

Raju Jan Singh's picture

For French, click here.

As the sovereign debt crisis is unfolding, many are wondering what could be its effects on the economies of the CFA franc zone, a part of Africa with close relations with Europe, especially France. In the case of Cameroon, the Euro zone still represents the main market for the country’s exports and hosts the largest community of Cameroonians abroad.

La crise de la zone euro et ses impacts sur l’Afrique sub-saharienne

Shanta Devarajan's picture

Lors d’une mission au Mali, j’ai présenté les constats du dernier « Pouls Africain » à un séminaire avec une centaine de participants, y inclus le ministre des finances du pays.   J’ai soulevé quatre points:

Recent reforms in Sierra Leone: Beating the effects of global economic downturn

Vijay Pillai's picture

Pay phone operator in FreetownThe year 2011 ended on a high note for the reformers in Sierra Leone.  There were two significant reforms which the government saw through – reforms that had been long overdue, but which now hold the potential of unleashing new investments and economic growth in the country.  Can Sierra Leone’s use these reforms to beat the potential effects of a global economic downturn?  One hopes so.

The energy sector in Sierra Leone has long faced under-investments. Not very long ago Freetown had the dubious distinction of being the darkest capital in the world and the Bumbuna dam remained elusive.

Africa’s 2012 growth prospects appear bright, but downside risks could dampen momentum

Punam Chuhan-Pole's picture

Sub-Saharan African countries bucked the slowdown in the global economy and grew at a robust pace in 2011 (see Africia's Pulse, February 2012 Update).  

The region’s output expanded by an estimated 4.9 percent, faster than in 2010 and just shy of the pre-crisis (average of 2003-08) level of 5 percent.  Excluding South Africa, the regional growth rate was 5.9 percent.  Particularly notable is the fact that this growth was widespread:  over a third of countries posted 6 percent or higher growth; another 40 percent grew at between 4-6 percent.  Equally important is the fact that several countries saw sustained growth rates of over 6 percent a year in both 2010 and 2011.

So what can Sub-Saharan Africa expect in 2012?  Barring a serious deterioration in the global economy, the outlook for the region seems bright, with a pickup in GDP growth to 5.3 percent in 2012 and 5.6 percent in 2013.  High commodity prices and strong domestic demand, especially buoyant private consumption, are expected to sustain the expansion.

But these factors also point to Africa’s vulnerability. 

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