The urgent need for financial reform to mobilise savings in sub-Saharan Africa

Public mechanisms will be most effective in mobilising savings in sub-Saharan Africa

A highly unsatisfactory mobilisation of savings by the liberalised financial systems of Sub-Saharan Africa has severely constrained investment and growth in the region. To a large degree, Sub-Saharan savings are directed towards non-financial assets and the informal financial sector because:

one can demonstrate status and wealth this way
the financial environment is typically risky
there are few formal options
minimum deposit and balance requirements as well as the time and administrative effort needed to access the formal sector are too high

Improvements in access, adequacy and reliability of financial assets are needed:

the semi-formal financial sector should be encouraged to provide further outlets for household savings
technological innovation should be promoted to increase access to finance
microfinance institutions could play a significant role in mobilising savings and pooling other financial resources

Public mechanisms to mobilise savings, however, could be more effective. Such mechanisms could comprise:

revitalised postal savings institutions
strengthened public pensions systems
rebuilt development finance institutions

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The urgent need for financial reform to mobilise savings in sub-Saharan Africa