Extending Financial Inclusion in Africa

Daniel Makina

• Publisher: Academic Press
• Year: 2019
• Print ISBN: 9780128141649
• eBook ISBN: 9780128142035
• Topic: Business
• Subtopic: Finance
• Index: Business

Extending Financial Inclusion in Africa unveils the genesis and transformation of Africa's financial sector and its ability to provide finance for all. Contributors of the Book traverse the whole spectrum of African financial systems, examining their depth and breadth and empirically evaluating their appropriateness and effectiveness to achieve inclusive financial services.- Explores the evolution of the financial sector in Africa from the pre-colonial to post-colonial era- Investigates the financial inclusion–economic growth nexus- Explores the role of financial regulation and governance in either enhancing or limiting financial inclusion- Evaluates unintended consequences of financial inclusion, including over-indebtedness and increased propensity to spend- Assesses cross-sectional evidence on the link between financial inclusion and technological developments such as the internet and mobile technology

Section 1

Introduction

Outline

1. An Overview of Financial Services Access and Usage in Africa

1

An Overview of Financial Services Access and Usage in Africa

Daniel Makina Department of Finance, Risk Management and Banking, University of South Africa, Pretoria, South Africa

Abstract

The chapter provides an overview of financial inclusion in Africa as well as brief snapshots of the contents of chapters in the book. This introductory chapter highlights the key issues covered in the book.

Keywords

Bottom of the economic pyramid; Financial inclusion; Global findex; Microfinance

1. 1. Introduction
2. 2. The State of Financial Inclusion at a Glance
3. 3. Africa's Institutional Environment
4. 4. Organization of the Book
   1. 4.1 Part II – Evolution of Financial Markets and Institutions
   2. 4.2 Part III – Geography of Financial Markets and Institutions
   3. 4.3 Part IV – Empirical Evidence Focusing on Africa
   4. 4.4 Part V – the Trajectory of Future Developments
5. References
6. Further Reading

1. Introduction

The clarion call – finance for all – has likely been around from as far back as when people started using money. In one of its publications, the Consultative Group to Assist the Poor (CGAP, 2006)provides salient historical milestones. Informal savings and credit groups are reported to have operated across the world for centuries. In 1462, towards the end of the Middle Ages, an Italian monk created the first official pawn shop, which did not charge interest in an effort to stem the usurious practices of private moneylenders who lent money at extortionate rates. Predictably, such pawn shops were not sustainable, leading Pope Leon X in 1515 to authorize the charging of interest so that pawn shops could cover their operating costs. Then in the 18th century, an Irish national, Jonathan Swift, established the Irish Loan Funds system, which could be regarded as the first microcredit program, as it disbursed small loans to poor farmers without collateral. In the 19th century, Friedrich Wilhelm Raiffeisen conceived a credit co-operative in Germany, which concept spread rapidly to other European countries and North America, eventually taking root in developing countries during the colonial periods. Between 1950 and 1970, governments took keen interest in expanding access to agricultural credit. To this end, they set up subsidized state-owned development finance institutions that would disburse concessional loans to farmers and small entrepreneurs which proved to be unsustainable once again. In the early 1970s, microcredit programs emerged whereby small loans were extended to groups of poor women, the early pioneers being Grameen Bank in Bangladesh, ACCION International in Latin America and the Self-Employed Women's Association Bank in India.

By the beginning of the 1990s, the term ‘microcredit’ was replaced by the term ‘microfinance’ – the provision of a full set of financial services such as credit, savings, money transfers, insurance and other related services to the poor. Today microfinance is provided not only by specialized institutions but also by a range of providers that includes both financial and non-financial institutions, such as telecommunications companies. The term ‘finance to all’ has now crystallized into the common term ‘financial inclusion’, which the Global Partnership for Financial Inclusion defines as provision of financial services – such as deposit and savings accounts, payment services, loans, and insurance – that are readily available to consumers so that they can actively and effectively use them to meet their specific needs. The role of financial inclusion has since been acknowledged in the goal to achieve the 17 Sustainable Development Goals (SDGs) adopted by the United Nations on 25 September 2015. Though none of the SDGs explicitly target financial inclusion, it is recognized as an enabler for most of them.

2. The State of Financial Inclusion at a Glance

The World Bank Global Findex (2017) estimates that about 1.7 billion adults in the world are unbanked; that is, they are without an account at a financial institution or through a mobile money provider. The majority of these unbanked popul...

Table of contents

• Cover image
• Title page
• Table of Contents
• Copyright
• List of contributors
• Section 1. Introduction
• Section 2. Evolution Of Financial Markets And Institutions
• Section 3. Geography Of Financial Markets And Institutions
• Section 4. Empirical Evidence Focusing On Africa
• Section 5. The Trajectory Of Future Developments
• Index