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

Photogallery Snowstorm Sweeps Northeastern US

'This is nothing like we feared it would be,' New York City Mayor Bill de Blasio says; he had earlier warned storm could be one of worst the city has ever faced More

Millions of Displaced Nigerians Struggle With Daily Existence

Government acknowledges over a million people displaced in 2014 due to fight against Boko Haram insurgency More

Facebook: Internal Error to Blame for Outages

Temporary outage appeared to spill over and temporarily slow or block traffic to other major Internet sites More

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

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Obama Urges Closer Economic Ties During Historic India Visiti
X
Aru Pande
January 26, 2015 9:33 PM
U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video Obama Urges Closer Economic Ties During Historic India Visit

U.S. President Barack Obama says the United States and India must do better to capitalize on untapped potential in their economic relationship - by removing some of the roadblocks to greater trade and investment. As VOA correspondent Aru Pande reports from New Delhi, Obama spoke after participating in India’s Republic Day celebration.
Video

Video US, EU Threaten New Russia Sanctions Over Ukraine

U.S. President Barack Obama has blamed Russia for an attack by Ukrainian separatists that left dozens dead in the port of Mariupol and cast further doubt on the viability of last year’s cease-fire with the Kyiv government. VOA’s Michael Bowman reports from Washington.
Video

Video White House Grapples With Yemen Counterterrorism Strategy

Reports say the U.S. has carried out a drone strike on suspected militants in Yemen, the first after President Barack Obama offered reassurances the U.S. is continuing its counterterrorism operations in the country. The future of those operations has been in question following the collapse last week of Yemen’s government. VOA White House correspondent Luis Ramirez reports.
Video

Video Kerry Warns Against Violence in Nigeria Election

US Secretary of State John Kerry visited Nigeria Sunday in a show of the level of concern within the U.S. and the international community over next month’s presidential election. Chris Stein reports.
Video

Video Zoo Animals Show Their Artistic Sides

The pursuit of happiness is so important, America's founding fathers put it in the Declaration of Independence. Any zookeeper will tell you animals need enrichment, just like humans do. So painting, and even music, are part of the Smithsonian National Zoo's program to keep the animals happy. VOA’s June Soh met some animal artists at the zoo in Washington. Faith Lapidus narrates.
Video

Video Worldwide Photo Workshops Empower Youth

Last September, 20 young adults from South Sudan took part in a National Geographic Photo Camp. They are among hundreds of students from around the world who have learned how to use a camera to tell the stories of the people in their communities through the powerful medium of photography. Three camp participants talked about their experiences recently on a visit to Washington. VOA’s Julie Taboh reports.
Video

Video Saudi, Yemen Developments Are Sudden Complications for Obama

The death of Saudi Arabia's King Abdullah and the collapse of Yemen’s government have cast further uncertainty on U.S. efforts to fight militants in the Middle East and also contain Iran’s influence in the region. VOA White House correspondent Luis Ramirez reports on the new complications facing the Obama administration and its Middle East policy.
Video

Video Progress, Some Areas of Disagreement in Cuba Talks

U.S. and Cuban officials are reporting progress from initial talks in Havana on re-establishing diplomatic ties. U.S. Assistant Secretary of State (for Western Hemisphere Affairs) Roberta Jacobson said while there was agreement on a broad range of issues, there also are some “profound disagreements” between Washington and Havana. VOA State Department correspondent Pam Dockins has the story.
Video

Video US, Japan Offer Lessons as Eurozone Launches Huge Stimulus

The Euro currency has fallen sharply after the European Central Bank announced a bigger-than-expected $67 billion-a-month quantitative easing program Thursday - commonly seen as a form of printing new money. Henry Ridgwell reports for VOA from London on whether the move might rescue the eurozone economy -- and what lessons have been learned from similar programs around the world.
Video

Video Nigerian Elections Pose Concern of Potential Conflict in 'Middle Belt'

Nigeria’s north-central state of Kaduna has long been the site of fighting between Muslims and Christians as well as between people of different ethnic groups. As the February elections approach, community and religious leaders are making plans they hope will keep the streets calm after results are announced. Chris Stein reports from the state capital, Kaduna.
Video

Video As Viewership Drops, Obama Puts His Message on YouTube

Ratings reports show President Obama’s State of the Union address this week drew the lowest number of viewers for this annual speech in 15 years. White House officials anticipated this, and the president has decided to take a non-traditional approach to getting his message out. VOA White House correspondent Luis Ramirez reports.
Video

Video S. Korean Businesses Want to End Trade Restrictions With North

Business leaders in South Korea are calling for President Park Geun-hye to ease trade restrictions with North Korea that were put in place in 2010 after the sinking of a South Korean warship.Pro-business groups argue that expanding trade and investment is not only good for business, it is also good for long-term regional peace and security. VOA’s Brian Padden reports.

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More

All About America

AppleAndroid