Cross-border banking has been an important part of Africa’s financial systems since colonial times. While it has long been dominated by European banks, its face has changed significantly over the past two decades. African banks have not only significantly increased their geographic footprint across the region (see Figure 1) but have also become economically significant beyond their home countries in a number of countries across Africa. As their banks have expanded across borders, South Africa, Nigeria, Morocco, and Kenya have emerged as the dominant regional financial centers (see Figure 2). Yet despite this increase in cross-border banking activity within Africa there has been a lack of comprehensive research and analysis on this topic. In a new policy report we try to fill this gap by documenting the growth of cross-border banking in Africa and assessing the risks and benefits of cross-border linkages as well current supervisory arrangements for cross-border supervisory coordination.
Figure 1: Cross-Border Expansion of African Financial Groups over Time,
In the wake of the global financial crisis, policy-makers’ attention has focused on lending to small and medium-sized enterprises (SMEs) as these were among the most affected firms when the credit cycle turned. SME finance has also attracted the attention of the G20 as it is seen as an important constraint on firm growth in developing, emerging and industrialized countries. Indeed, a joint report by IFC and McKinsey has pointed to a global SME financing gap of over 2 trillion USD (Stein, Goland and Schiff, 2010). Various initiatives, such as the SME Finance Challenge and the SME Finance Forum, have consequently been established to try to alleviate small firms’ funding constraints.