The outlook for commercial bank lending to sub-Saharan Africa

Ellen Johnson Sirleaf and Francis Nyirjesy

No 720, Policy Research Working Paper Series from The World Bank

Abstract: Since its peak in 1980-82, medium- and long-term commercial bank lending to sub-Saharan Africa has been declining - partly because of many banks'perception that lending to the African market represents high risks unjustified by the available returns. The prospects for an appreciable increase in such lending are not promising. Despite some progress under economic adjustment programs, banks are skeptical about sub-Saharan African governments'ability and willingness to continue with reform. And in a time of tight regulation, most banks have ample opportunities in other parts of the world. The purpose of this paper is to identify and examine key issues involved in the future of long-term commercial bank lending to Africa. It presents the historical record and briefly reviews the nature of commercial bank lending and the changing profile of foreign commercial bank presences in the region. It examines the constraints to and opportunities for increased commercial bank lending as perceived by a representative sampling of commercial banks in the United States, Europe, and Japan. Finally, the paper presents a scope for action, a pulling together of ideas that could help remove constraints to lending to a select number of sub-Saharan African markets in the short-term, with a view to stimulation of lending to the entire region in the long-term.

Keywords: Banks&Banking Reform; Financial Intermediation; Financial Crisis Management&Restructuring; Economic Adjustment and Lending; Economic Theory&Research (search for similar items in EconPapers)
Date: 1991-07-31
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