Feature Publication: Achieving Financial Stability and Growth in Africa

May 04, 2016

Edited by Stephany Griffith-Jones, Ricardo Gottschalk

Sovereign debt bond issuing by African countries has soared sharply in recent years, but new issuing is carrying growing borrowing costs and risks in the current global environment of heightened economic uncertainty and volatile capital flows. This book alerts to the need of sensible management of capital flows, so that African low income countries in future are shielded from volatile sources of finance, ensuring their economies are not blown off course by costly financial and Balance of Payments crises, which could be so damaging for long tem investment and development, as well as risk sharp increases in number of poor people. The book also explores how the domestic financial system should be regulated and structured to achieve the twin goals of inclusive growth and financial stability. It draws on the lessons and radical rethinking on the financial sector in developed and middle income countries, arising in the wake of the international financial crisis. The book includes four in- depth country case studies, of Kenya, Ghana, Nigeria and Ethiopia, but also analyses the empirical evidence for Sub-Saharan Africa as a whole, evaluating the relevance (or not) of major changes in international thinking for the very different financial sectors and economies in low income countries. The book challenges the view that financial deepening is always positive for economic growth, cautioning that there can be too much finance and too much private credit; in the case of low-income countries, there may be space for further expansion of their rather shallow financial sectors, especially in ways beneficial for inclusive development, but such expansion should be gradual, to avoid excessively rapid growth of credit, that so often contributes to crises afterwards. Furthermore, as the book explores the delicate balancing between the goals of financial inclusion, financial stability and sustainable growth, it concludes that good finance is still crucial to economic development, and that low-income countries must use the lessons of the global financial crisis to help identify which forms of financial development are most beneficial to their own needs and developmental goals. Order your copies of the book
today now available at the publisher's website.
__________________________________________________________________ 'Ahead of the 2008 crisis many economists assumed that financial deepening - including increased private credit as a percent of GDP - was always positive for economic growth. We now know that there can be too much finance and too much private credit. But good finance is still crucial to economic development, and low- income countries must use the lessons of the global financial crisis to help identify which forms of financial development are most beneficial. This book will play an important role in that debate, combining sound empirical analysis, informative case studies and thoughtful synthesis of the overall insights and implications.' - Adair Turner, former chair of the UK Financial Services Authority and author of Between Debt and the Devil 'This is a compelling factual study about a critical dilemma for policy making in LICs - delicately balancing the trinity of financial inclusion, financial stability and growth agendas. This is even more challenging in the face of globalisation, inadequacies within domestic jurisdictions, ongoing reforms to global regulatory architecture and new rules like Anti Money Laundering that pose unintended consequences.' - Louis Kasekende PhD, Deputy Governor, Bank of Uganda 'This book is very timely - we know that for many low income countries financial regulation is at a crossroads, as policy makers strive to find a promising way forward, after the global financial crisis (2007-8). Of course, some recent studies have tried to re-examine financial regulation post-2008. But this book is exceptional: it offers a nice twist, 'financial regulation for stability and growth'; it is meticulously researched, under an ESRC-DFID funded project on bank regulation, led by Stephany Griffith-Jones and involving other leading scholars in the field, who have deep appreciation for policy and practice. Moreover, the book presents a uniquely rich body of findings from four case studies, on Ghana, Ethiopia, Nigeria and Kenya, written by country scholars (e.g. the case on Kenya by Francis Mwega is a prize winner). The case study findings will ring bells with researchers and resonate with policy advisers and policy makers at central banks in Africa. Overall, I strongly endorse this outstanding book, which will strike a chord with many African central bank governors, on the question of financial regulation for stability!' - Professor Victor Murinde, University of Birmingham, UK