The financial sector in Africa; overview and reforms in economics adjustment programmes.

Abstract

This paper has reviewed the structure of the financial sector in Africa articulated the problems and discussed the nature of reforms adopted to overcome them. The overview shows that commercial and merchant banks and specialised lending institutions are key .financial intermediaries in Africa. including stock exchanges and.finance houses. However, the development of the institutions varies from country to country, depending on the dynamism of central banks and sophistication of economic agents. Although the financial sector in Africa has recorded notable progress, it has nonetheless been afflicted with a number of problems. The problems have arisen mainly from inhibitive policy environment, inadequate prudential regulations and supervision, capital inadequacy, widespread incidence qf non-performing loans, inadequate legislation for dealing with insolvent.financial institutions and inflation. Efforts towards tackling these problems emphasized financial liberalization undertaken alongside macroeconomic reforms. Among the key macroeconomic reforms are market-based approach to credit allocation, deregulated interest rates structure, complementary fiscal exchange rate and other monetary management policies. The appropriate sequencing of these reform measures and a progressive move towards indirect monetary control will strengthen considerably Africa's formal .financial markets.