The outlook for commercial bank lending to sub-Saharan Africa

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.