“If you have something to say, say it here on cameroonwebnews”

Cameroonwebnews| Site d’information et d’opinions sur l’actualité du Cameroun

Actualités, Opinions, Blogs et Videos sur le Cameroun

“Si vous avez quelque chose à dire, dites le sur cameroonwebnews”

Why are CFA countries’ financial sectors so shallow?

Posted by Admin on Mar 31st, 2010 and filed under Economie, Featured. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

Submitted by Raju Jan Singh | 31 march 2010 |

During the 1980s and early 1990s, many African countries undertook reforms to deepen their financial sectors. Nevertheless, financial sectors in African countries remain among the shallowest in the world.  Within Africa, financial depth in the CFA franc zone is even more limited.  Why? Dhaneshwar Ghura, Kangni Kpodar and I examine this question.

Financial institutions operate with incomplete information. Entrepreneurs seeking financing have more information about their projects than their banks. Projects that differ in their probability of success are indistinguishable from the viewpoint of a financial institution. Banks have to gather information, or require collateral, to grant loans only to the most promising projects.  In this setting, governance, property rights, or creditor information could play a major role.

Looking at a sample of 40 countries between  1992 and 2006, we find that the gap in financial development between the CFA franc zone countries and the rest of Africa can be explained by differences in institutional quality (e.g., availability of credit information, and strength and enforcement of property rights), variables that policy makers can influence.

While financial liberalization and macroeconomic stability are necessary conditions for financial deepening, they are not sufficient.

What can CFA countries do?

They can expand creditor information and strengthen creditor rights. These, however, involve complex processes. The coverage of existing credit bureaus should be extended and include as much information as possible on the repayment profile of customers.

This must be achieved while preserving an appropriate degree of privacy and safeguarding sensitive information.

Strengthening creditor rights would require changes in legislation governing debt collection and collateral. Legislation on debt recovery would depend in turn on efficient property registration and land surveying in both cities and countryside. Finally, reform of the courts is vital for improving enforcement.

Lire l’article en français ici

Related posts:

  1. The 2010 Africa Carbon Forum cameroonwebnews.com| March 24, 2010 | BAD| The Africa Carbon Forum...
  2. Africa: Report – Bad Roads Slow Continent’s Growth to a Crawl Paul Redfern | 16 November 2009 |AllAfrica.com Nairobi — The...
  3. La BAD publie une analyse sur la réponse de l’Afrique à la crise (Fr/En) cameroonwebnews.com| 21 Janvier 2010| BAD La Banque africaine de développement...
  4. New Money Transfer Mechanism in Gestatione Godlove BAINKONG |24/02/2010| Cameroon Tribune| Stakeholders of the device code-named,...

Related posts brought to you by Yet Another Related Posts Plugin.

Comments are closed

Advertisement