Support of the Partnership Making Finance Work for Africa (MFW4A)

Project description

Title: Support of the Partnership Making Finance Work for Africa (MFW4A)
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Africa, supraregional
Partner: MFW4A Secretariat | hosted at the African Development Bank (AfDB)
Overall term: 2008 to 2016

Context

A well-developed financial sector is critical to economic development and poverty reduction in Africa. The economy’s ability to create jobs and enhance prosperity depends on the private sector’s access to secure forms of saving, efficient payment services as well as appropriate loan and insurance products.

Yet with less than 20 percent of all African households holding a bank account and an even smaller share an insurance policy, exclusion from formal financial services is significantly higher in Africa than in other world regions. Business surveys among small and medium-sized enterprises (SMEs) reveal that the lack of access to credit is the most significant impediment to firm growth in Africa, even ahead of other important challenges including inadequate infrastructure and corruption.

Many African politicians and decision-makers have long recognized the catalytic role that the financial sector can play in mobilizing domestic resources for productive investment, growth and job creation.

-makers have long recognised the potential of the African financial sector to mobilise local resources.

Objective

The capacity of state and private actors to implement successful reform and development programmes in the African financial sector has improved.

Approach

The reform and development of African financial markets requires cooperation between various actors in the public and private sectors and an upgrade of a variety of legal standards, regulations and institutions.

On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), GIZ has been providing funding and technical assistance for the Making Finance Work for Africa (MFW4A) Partnership since 2007. Other donors include the French development agency AFD, the African Development Bank (AfDB), the Consultative Group to Assist the Poor (CGAP), the German development cooperation, the European Investment Bank (EIB), FIRST (Financial Sector Reform and Strengthening Initiative), the International Monetary Fund (IMF), the Dutch Ministry of Foreign Affairs (MINBUZA), the US Agency for International Development (USAID) and the World Bank.

On behalf of BMZ, GIZ currently holds the chair of the Partnership’s Supervisory Committee. The GIZ program supports the MFW4A Partnership through capacity development measures for the MFW4A Secretariat and through the provision and exchange of knowledge.

The MFW4A Secretariat, the “heart” of the Partnership where all threads of stakeholder, donor, public and private sector contributions converge, is hosted at the AfDB in Abidjan. Its web-based knowledge platform (www.mfw4a.org) has become a renowned information hub for data, news, research and other resources on African financial sectors. The Secretariat regularly informs more than 8,000 decision makers and professionals shaping financial sector development in Africa about recent developments and upcoming events via its newsletter. To promote better policy coordination between African governments, MFW4A supports regional and national policy dialogue. Last but not least, the Partnership enhances the efficiency and effectiveness of donor projects in the realm of financial sector development in Africa by promoting coordination, transparency and learning about good practices.

In a nutshell, the Partnership’s activities aim to expand access to affordable and appropriate financial services, deepen financial markets and strengthen institutional capacity.

  • Better access to financial services enables poor people to boost household incomes, invest in education, and become more resilient to crisis situations.
  • Increasing the volume of loans to the private sector to 25 percent of GDP will make more than USD 70 billion of additional investment funds available for African companies and households.
  • A reduction in interest rates, which is to be achieved through efficiency gains at the banks and in the credit environment, could save African borrowers more than USD 3 billion each year.
  • Strengthening institutional and regulatory capacity will contribute to creating more reliable, less crisis-prone financial sectors that offer adequate protection for savers and consumers.