Executive Directors of the African Development Bank Group on Wednesday, October 29, 2014 in Abidjan approved a landmark Financial Sector Development Policy and Strategy (FSDPS) which aims to improve access to financial services by the underserved and to broaden and deepen the continent's financial systems.
Described as "the next page in the history of the Bank's work," the FSDPS lays out the strategic direction of the Bank Group's financial sector work in RMCs during 2014-2019, with a strong focus on financing to accelerate Africa's transformation.
The FSDPS supports the Bank's vision for Africa's financial sector. Through it, the Bank Group, working with other key development partners, will support African countries and the regional economic communities in meeting three mutually reinforcing objectives:
Increasing access to a range of quality, reliable, and affordable financial services paying particular attention to reaching the traditionally underserved (including women and youth) through the most effective approaches, including innovations consistent with the requirements of financial stability.
Deepening financial markets through sound financial sector policies, laws, and regulatory frameworks that provide a conducive environment for a diverse range of financial institutions that can provide a wide range of products and services (leasing, factoring, insurance), and the development of diverse financial instruments (credit lines, bonds, equities,) that can mobilize term finance.
Safeguarding the stability of Africa's financial system through strengthening the monitoring and supervision of financial institutions and capacities to ensure compliance with national and regional regulations and international financial standards.
By promoting vibrant, efficient, innovative and robust financial systems in a competitive market in line with the goals and objectives of the Bank's Ten Year Strategy (2013-2022), the FSDPS will put finance at the service of the productive sectors, and strengthen the capacity to finance Africa's inclusive growth. The new Policy and Strategy also complements the Bank Group's Private Sector Development Strategy and takes into account the special needs of Middle-Income Countries (MICs), Lower-Income Countries (LICs), and Fragile States, as well as gender and food security considerations.
It will facilitate access to investment and working capital by financial institutions, contribute to developing local capital markets, and help reduce the trade finance gap on the continent. Under the policy and strategy, the Bank Group will promote better corporate governance and better risk management of financial institutions, in compliance with international best practices, standards and regulations.
In preparing the FSDPS, the Bank Group identified the absence of deep, efficient financial markets as key constraints to Africa's economic growth. "Limited access to finance lowers welfare and hinders the alleviation of poverty and the emergence of a middle class, while implementing monetary policy in a context of shallow markets is costly and inefficient." The Strategy is cognizant that the demand from RMCs is high and the Bank can neither respond alone, nor try to do everything. Forging strategic alliances will therefore be essential for successful implementation.
Thus, the FSDPS aims to put in place "well-functioning financial systems that mobilize and allocate savings, supply the credit needs of economic agents, and allocate resources more efficiently while reducing intermediation costs," says Stefan Nalletamby, AfDB's Financial Sector Development Director.
