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Access to Bank Credit in Sub-Saharan Africa: Key Issues and Reform Strategies

Aug 01, 2005 | E. Sacerdoti | IMF
The paper examines the role that public finance deficits play in constraining privatesector credit, and addresses the question of the magnitude of spreads between lending anddeposit rates. A main conclusion is that eliminating the obstacles generated by excessivepublic deficits and macroeconomic instability is only a first necessary step to promote bankintermediation, but not a sufficient condition for its expansion. Indeed, the improvement ofthe information, legal and judicial environment is essential in order to create an environmentmore conducive to credit expansion. The paper notes that central banks can play a moreactive role in promoting a credit culture, through, inter alia, strengthening credit reporting,credit bureaus, and rating systems. Borrowers can also improve their chances for access tocredit by participating in well designed mutual guarantee funds, as is the case in moreadvanced countries. The paper also underscores that, as regards agricultural credit, creditschemes provided by marketing boards, and similar cooperative schemes, cannot be easilyreplaced, and may well remain the main venue for providing needed credits for inputs, inview of the absence of real estate titles and other adequate collateral.