News / Africa

    African Banks Decrease Lending to Private Sector

    Multimedia

    Audio

    In the early stages of the global recession, many African bankers and analysts dismissed the decline as a western issue.  Their assumptions were based on the fact that most African financial institutions, especially in sub-Saharan Africa, were not part of the larger network of the global financial structure.  A few others cautiously monitored it.  A few banks in developing countries like South Africa have successfully integrated into the global financial system, but even so, the impact was expected to be minimal or non-existent.

    But with time, many African bank executives and economic analysts were proven wrong in their initial assessments.  They acknowledge that they had failed to take into consideration the fact that in the past decade African banks have been working hard to be integrated into the international financial system.  Integration has its economic benefits, but it has also made the continent more susceptible to the ebbs and flows of global financial institutions.

    Most African countries were relatively “insulated” from the shock of the financial collapse “because African banks don’t deal in these derivatives and credit default swaps,” says Professor Shantayanan Devarajan, the chief economist of the World Bank's Africa Region. 
       
    But that is not enough to guarantee a firewall against a global collapse.  What we are seeing in Africa, he says, is the second- or third-round effects of the financial collapse.
       
    Africa was the recipient of over 50 billion dollars of private capital flow from the West, says Devarajan, but most important was the decline in commodity prices.  So when western private investors lose money as a result of the financial crisis, there’s less to lend or invest in Africa.
       
    “Africa was also receiving over 20 billion dollars in remittances” He says. The amount of remittances has considerably fallen since 2007.  Lastly he says, there has been a fall in tourism revenue since most westerners have cut back on travel.
       
    Local banks affected
       
    In Rwanda’s commercial bank, Cherno Gaye works as the chief financial officer. He uses the analogy of the “chicken and 3gg” when asked why banks have cut down on lending.  “The players in the real sector are complaining that the banks are not giving us money, then the banks are saying that business is actually slow…. it is a conundrum.”  He says once the export sector was affected, it had a knock-on effect on other sectors.

    The slowdown has made it hard for businesses to service existing loans and access new ones.  Most importantly however, long-term depositors like the Rwanda Social Security Fund are undertaking major real estate investments.  This requires huge amounts of cash on hand to complete projects, which explains fewer deposits and huge withdrawals of millions of francs -- the same money that a commercial bank often uses as rotating funds.
       
    “Our assets at the end of last year was over a one hundred billion francs; by June this year it had gone down to just over 900 billion francs.”  But some companies have been able to show strong growth despite the downturn. “… the financial crisis is proving some economic theories wrong”. He gives an example of the telecoms and utility companies. Reports show that Africa has the fastest-growing telecommunications market in the world. Urbanization has led to ever increasing demand for electricity and other power supplies.

    Jack Kayonga is the director of the Rwanda Development Bank.  Even though he acknowledges the effects the global crisis has had on local banks, he downplays the impact on the private sector specifically the real estate market “There is still room to grow” He says.
       
    Bosco Mugabe is a small business owner in Kigali. He imports products from neighboring Kenya. For the past year it has been hard for him to access loans to pay his suppliers. Local banks are less willing to give him loans and so he was forced to decrease his business.

    You May Like

    US, Somalia Launch New Chapter in Relations

    US sends first ambassador to Somalia in 25 years; diplomatic presence and forces pulled out in 1993, after 18 US soldiers were killed when militiamen shot down military helicopter

    Brexit Vote Ripples Across South Asia

    Experts say exit is likely to have far-reaching economic, political and social implications for a region with deep historic ties to Britain

    Russian Military Tests Readiness With Snap Inspections

    Some observers see surprise drill as tit-for-tat response to NATO’s recent multinational military exercises in Baltic region

    This forum has been closed.
    Comments
         
    There are no comments in this forum. Be first and add one

    By the Numbers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Testing Bamboo as Building Materiali
    X
    June 27, 2016 9:06 PM
    For thousands of years various species of bamboo - one of the world's most versatile plants - have been used for diverse purposes ranging from food and medicine to textiles and construction. But its use on a large scale is hampered because it's not manufactured to specific standards but grown in the ground. A University of Pittsburgh professor is on track to changing that. VOA’s George Putic reports.
    Video

    Video Testing Bamboo as Building Material

    For thousands of years various species of bamboo - one of the world's most versatile plants - have been used for diverse purposes ranging from food and medicine to textiles and construction. But its use on a large scale is hampered because it's not manufactured to specific standards but grown in the ground. A University of Pittsburgh professor is on track to changing that. VOA’s George Putic reports.
    Video

    Video Orphanage in Iraqi City Houses Kids Who Lost their Parents to Attacks by IS

    An orphanage in Iraqi Kurdistan has become home to scores of Yazidi children who lost their parents after Islamic State militants took over Sinjar in Iraq’s Nineveh Province in 2014. Iraqi Kurdish forces backed by the U.S. airstrikes have since recaptured Sinjar but the need for the care provided by the orphanage continues. VOA’s Kawa Omar filed this report narrated by Rob Raffaele.
    Video

    Video Re-Opening Old Wounds in a Bullet-Riddled Cultural Landmark

    A cultural landmark before Lebanon’s civil war transformed it into a nest of snipers, Beirut’s ‘Yellow House’ is once again set to play a crucial role in the city.  Built in a neo-Ottoman style in the 1920s, in September it is set to be re-opened as a ‘memory museum’ - its bullet-riddled walls and bunkered positions overlooking the city’s notorious ‘Green Line’ maintained for posterity. John Owens reports from Beirut.
    Video

    Video Brexit Resounds in US Presidential Contest

    Britain’s decision to leave the European Union is resounding in America’s presidential race. As VOA’s Michael Bowman reports, Republican presumptive nominee Donald Trump sees Britain’s move as an affirmation of his campaign’s core messages, while Democrat Hillary Clinton sees the episode as further evidence that Trump is unfit to be president.
    Video

    Video New York Pride March A Celebration of Life, Mourning of Loss

    At this year’s march in New York marking the end of pride week, a record-breaking crowd of LGBT activists and allies marched down Manhattan's Fifth Avenue, in what will be long remembered as a powerful display of solidarity and remembrance for the 49 victims killed two weeks ago in an Orlando gay nightclub.
    Video

    Video NASA Juno Spacecraft, Nearing Jupiter, to Shed Light on Gas Giant

    After a five-year journey, the spacecraft Juno is nearing its destination, the giant planet Jupiter, where it will enter orbit and start sending data back July 4th. As Mike O'Sullivan reports from Pasadena, California, the craft will pierce the veil of Jupiter's dense cloud cover to reveal its mysteries.
    Video

    Video Orlando Shooting Changes Debate on Gun Control

    It’s been nearly two weeks since the largest mass shooting ever in the United States. Despite public calls for tighter gun control laws, Congress is at an impasse. Democratic lawmakers resorted to a 1960s civil rights tactic to portray their frustration. VOA’s Carolyn Presutti explains how the Orlando, Florida shooting is changing the debate.
    Video

    Video Tunisian Fishing Town Searches for Jobs, Local Development Solutions

    As the European Union tries to come to grips with its migrant crisis, some newcomers are leaving voluntarily. But those returning to their home countries face an uncertain future.  Five years after Tunisia's revolution, the tiny North African country is struggling with unrest, soaring unemployment and plummeting growth. From the southern Tunisian fishing town of Zarzis, Lisa Bryant takes a look for VOA at a search for local solutions.
    Video

    Video 'American Troops' in Russia Despite Tensions

    Historic battle re-enactment is a niche hobby with a fair number of adherents in Russia where past military victories are played-up by the Kremlin as a show of national strength. But, one group of World War II re-enactors in Moscow has the rare distinction of choosing to play western ally troops. VOA's Daniel Schearf explains.
    Video

    Video Muslim American Mayor Calls for Tolerance

    Syrian-born Mohamed Khairullah describes himself as "an American mayor who happens to be Muslim." As the three-term mayor of Prospect Park, New Jersey, he believes his town of 6,000 is an example of how ethnicity and religious beliefs should not determine a community's leadership. Ramon Taylor has this report from Prospect Park.
    Video

    Video Internal Rifts Over Syria Policy Could Be Headache for Next US President

    With the Obama administration showing little outward enthusiasm for adopting a more robust Syria policy, there is a strong likelihood that the internal discontent expressed by State Department employees will roll over to the next administration. VOA State Department correspondent Pam Dockins reports.
    Video

    Video Senegal to Park Colorful ‘Cars Rapides’ Permanently

    Brightly painted cars rapide are a hallmark of Dakar, offering residents a cheap way to get around the capital city since 1976. But the privately owned minibuses are scheduled to be parked for good in late 2018, as Ricci Shryock reports for VOA.

    Special Report

    Adrift The Invisible African Diaspora