Financial technology (fintech) companies in Africa have nearly tripled in number since 2020, improving access to finance for people and businesses across the continent, says development finance institution EIB's 'Finance in Africa 2024' report.
“Fintech is revolutionising the way we think about finance in Africa. By leveraging technology, we can improve access to finance for millions and foster sustainable economic growth,” says EIB VP Thomas Östros.
Digital finance is expanding much faster than traditional banking, and the number of African companies offering new products and services in the area of finance jumped to 1 263 at the start of 2024 from 450 in 2020.
However, private-sector credit fell to 36% of GDP in 2022 from 56% of GDP in 2007, which is one of the obstacles to finance that the report highlights that remains a significant constraint on economic development.
The decline in private-sector credit hinders growth in productive economic assets, impeding industrialisation on the continent, he emphasises.
Increasing trade among African countries could boost development because the industrial share of intra-African exports is nearly double that of other destinations, according to the EIB report.
Meanwhile, the EIB 'Banking in Africa' survey details diverse challenges and confirms the resilience of the African banking sector.
The analysis shows that, among sub-Saharan African banks, 77% of survey respondents report that current economic conditions are their main concern, followed by asset quality at 53% of banks.
More than one-third, or 34%, of the banks report asset quality deterioration owing to extreme weather events, and identify small and medium-sized enterprises as the most affected borrowers, according to the 'Banking in Africa' survey.
Africa is amongst the most exposed regions in the world to the physical risks stemming from climate change, based on the EIB Climate Risk Scores, the lender highlights.
Concerns about funding also persist, with about one-third of banks citing a lack of capital and the cost or availability of funding as problems.
“While we see some signs of improvement, the high cost of finance remains a source of concern.
“As we navigate the dual challenges of climate change and the digital transformation, the role of multilateral development bank lending is ever more relevant in supporting sustainable growth on the continent,” said EIB chief economist Debora Revoltella.
A decline in sovereign bond yields has allowed several African nations to regain access to international bond markets.
Although the EIB Financial Conditions Index indicated some easing, financial conditions remained tight, posing challenges for private-sector development, she added.
Meanwhile, nearly 70% of banks report better loan performance - lower rates of non-performing loans - among women-led firms.
The report shows the advantage of lending to women, and 17% of African banks plan to introduce a dedicated gender strategy in their operations, the EIB says.
Nine out of 10 banks could soon have a gender strategy in place, the lender notes.
Edited by: Creamer Media Reporter
EMAIL THIS ARTICLE SAVE THIS ARTICLE
ARTICLE ENQUIRY
To subscribe email subscriptions@creamermedia.co.za or click here
To advertise email advertising@creamermedia.co.za or click here