The Long-Term Finance Radar
The radar graph provides an overview of how the continent or a specific country ranks, both across the different types of indicators and relative to other African countries or relevant sub-regions or with the African continent as a whole, allowing the reader to quickly identify “weaknesses” and “strengths”. For each of the four categories of data the “radar graph” includes three selected variables that summarize the available data.
Level of development of the enabling environment (business environment and regulatory framework) seems capable of supporting higher levels of sources, depth, and uses of long-term finance in Africa. In terms of sources of long-term finance, the channelling of domestic savings is the mainstay of LTF promotion.
The Long-Term Finance's Radar
(rescaled indicators over 2013-2020)
Sources of Long-Term Finance
African countries largely dependent on foreign sources for long-term financing.
Domestic savings (19.0% of GDP) lag behind the average of lower middle income countries (24.4% of GDP).
Foreign direct investment and cross-border lending in line with the average of lower middle income countries (respectively 2.2% of GDP and 10.8% of GDP). While Official Development Finance (2.2% of GDP) is higher than in the average of lower middle income countries (0.9% of GDP).
Depth of Long-Term Finance
Banking: private credit to GDP (43.2%) above average of lower middle income countries (35.9%). But excluding South Africa, this ratio falls down to 25.7%.
If banking and capital markets lag behind, insurance sector is in line with average of lower middle income countries. Insurance penetration (3.7% of GDP) and insurance companies’ assets (17.6% of GDP) slightly higher than the average of lower middle income countries (1.2% and 5% of GDP, respectively). During the last decade, life insurance industry represented 41.4% of total insurance business in African countries, a relatively low proportion compared to other global markets.
Uses of Long-Term Finance
A large part of the credits is intended for the service sectors (around 48%), followed by that of the no-manufacturing sector (a little more than 30%). The agricultural sector benefits from only 4.1% of the total credits granted to the economic activity.
Maturity structure of the banking sector loans in African countries shows that the share of long-term credit still remains at a relatively modest level.
The share of long-term loans (with maturity larger than five years) averages 29.2%, whereas it’s close to a third of bank loans in high-income economies. While nearly half of bank loans (40.1%) are short-term (maturity less than one year).