African Development Policy
Program Director: Leonce Ndikumana
PERI and African Development Institute (EADI) Host Capacity Building Workshop for African Policy Makers
Inclusive Finance for Equitable and Sustainable Economic Development
November 2016, Nairobi, Kenya
Access to finance is an important prerequisite for sustainable development and improvement in the living standard of the majority of the population. Today, a large fraction of the African people does not have access to modern means of savings, credit, and long-term investment finance. Less than 30 percent of the African adult population have an account at a formal financial institution. Under this measure, access to finance ranges from less than 2% in Nigeria to 80% in Mauritius. Despite recent gains due partly to penetration of mobile banking technology, the gaps in access to finance remain large especially in the rural area and in the informal sector generally. Moreover, even when they are accessible, financial services remain onerous, which discourages private sector activity and may even expose households to financial distress.
To facilitate a policy discussion on this important topic, the African Development Institute of the African Development Bank and the Political Economy Research Institute (PERI) organized a workshop for senior African policy makers on “Inclusive Finance for Equitable and Sustainable Economic Development” in Nairobi, Kenya from November 14 to 18, 2016. The workshop provides African policy makers with an opportunity to share their experiences on progress made as well as challenges encountered in their countries in promoting financial inclusion as a driver of inclusive economic development. The discussion explores strategies to manage and regulate the financial system (the banking sector and non-bank institutions) to increase access to finance, improve the allocation of investment capital into high-growth and employment-generating activities, and enhance the role of the financial system in economic transformation, growth, and poverty reduction.
The following themes were discussed in the workshop:
Module 1: Access to finance in Africa over time and relative to other regions
Module 2: Inclusive finance and poverty reduction
Module 3: Financial inclusion, domestic investment and employment creation
Module 4: Financing small and medium size enterprises, youth- and women-owned enterprises
Module 5: Legal and regulatory framework for financial inclusion
Module 6: National development banks and financial inclusion
Module 7: Development central banking and financial inclusion
Module 8: Inclusive finance and green growth
Capital Flight from Africa: Causes, Effects and Policy Issues
Capital flight is a critical challenge to economic development in African countries. While Africa receives a substantial amount of capital inflows in the form of official development assistance, external borrowing and foreign direct investment, it also suffers a heavy financial hemorrhage through capital flight.
S. Ibi Ajayi (University of Ibadan) and Léonce Ndikumana (Director of PERI's Africa Policy Program) have edited a new collection of analysis of capital flight from Africa with Oxford University Press. The book is available here. Select chapters are available as PERI Working Papers. Read them here:
"Capital Flight and Monetary Policy in African Countries," by Hippolyte Fofack and Léonce Ndikumana
"Capital Flight: Measurement and Drivers," by Léonce Ndikumana, James K. Boyce and Ameth Saloum Ndiyae
"Governance and Illicit Financial Flows," by Melvin D. Ayogu and Folarin Gbadebo-Smith
"Illicit Financial Flows and Stolen Assets Value Recovery," by Melvin D. Ayogu and Julius Arbor
"Capital Flight and Poverty Reduction in Africa," by Janvier D. Nkurunziza
"Strategies for Addressing Capital Flight," by James K. Boyce and Léonce Ndikumana
Savings, Capital Flight, and African Development
Historically, countries that have achieved and sustained high growth rates maintained high domestic saving rates, enabling domestic investment and job creation. But saving in African countries has remained low, leading to high investment-savings gaps, and increased dependence on external capital. This analysis by Léonce Ndikumana, Director of PERI's African Development Policy Program, suggests that strategies to address domestic savings should include policies to curb and prevent further capital flight (the leakage of financial resources) from Africa, the levels of which have exploded over the past decade. This paper is forthcoming as a chapter in Handbook of Africa and Economics, edited by Celestin Monga and Justin Y. Lin (Oxford University Press).