Reforming African Financial Markets in the Era of Globalisation

This chapter discusses selected key aspects of African financial systems. It begins with an introductory perspective on African economies today and throws some light on the most salient features of the continent’s economic standing. Important steps have been taken since the mid 1980s to promote a more sustainable financial system as a masterpiece in a private-sector-led economy. The second section outlines some areas where reforms are still needed, as well as discussing the positive developments that have taken place since the wide adoption of structural adjustment programmes. The third section goes into the specifics and touches on aspects such as external liberalisation and foreign exchange operations, money market development and monetary policy options, issues in banking supervision and the challenges represented by global banking regulation. In many cases the reforms of the formal financial sector have been paralleled by a gain in share of the informal finance sector. The fourth section looks at the role of rural financial markets and how financial market fragmentation is at work in African countries, discusses the mission of microfinancial institutions in this context and highlights further avenues for more integrated financial markets. The final section offers some guiding principles for financial market reforms.