What financial regulation for stability and financial inclusion in Africa? The views of regulators of Ethiopia, Kenya and Lesotho

Working and discussion papers
March 2015
Ricardo Gottschalk
Regulators from Africa share the view that financial systems in the region are improving. However, loan spreads are still extremely high, despite increased competition, the latter enhanced with the presence of foreign banks. Lending is still largely insufficient and highly skewed towards the top end of the market, although recent progress has been made towards greater financial inclusion. Their financial systems are still characterized as a bank based. The ideal is to move towards a more diversified system, with different institutions, funding structures and roles. There are considerable regulatory and supervisory challenges, not least in the area of capacity, and the need to implement financial standards designed internationally. The response has been a gradual and selective adoption of standards, and continuous investment in capacity building. Regional colleges or supervisors has been regarded as an additional, extremely useful forum to enhance capacity for a better and safer financial system.