Private Sector & Development Proparco’s magazine Private Sector and Development aims to analyse, understand and improve the mechanisms by which the private sector contributes to sustainable development in South countries. Private sector and development is a bimonthly magazine published by PROPARCO that aims to provide a forum – with one topic per issue - for experts with different and complementary approaches to debate issues relating to the role of the private sector in the development of South countries, with a focus on Sub-Saharan Africa. Subscription to Private Sector and Development is free. www.proparco.fr Private Sector & Development magazine PROPARCO 151, rue Saint Honoré 75001 Paris revue_spd@afd.fr. Private sector players (entrepreneurs, investors, financiers...), researchers and donors will be shedding light – with complementary or contradictory views – on topics such as SME financing in Africa, the role of the private sector in access to water, microfinance, or the impacts of the development of mobile telephony... Private Sector and Development is free and is published in French and English. It is available in both digital and paper format. J\Zk\li Gi`m ; m\cfgg\d\ek Gi`mXk\ J\Zkfi ;\m\cfgd\ek D9 J=NM= <= HJGH9J;G L@= J=NM= G> HJGH9J;G =\alg GXi G`\ii\ =iXe f`j" Beh[c ?fikc Zebeh[i hejW hei[i Si meliora dies, ut vina, poemata reddit, scire velim, chartis pretium quotus arroget annus. Scriptor abhinc annos centum qui decidit, inter perfectos veteresque referri debet an inter vilis atque novos. Excludat iurgia finis, est vetus atque probus, centum qui perficit annos. Quid, qui deperiit minor uno mense vel anno, inter quos referendus erit. Veteresne poetas, an quos et praesens et postera respuat aetas. Iste quidem veteres inter ponetur honeste, qui vel mense brevi vel toto est iunior anno. Utor permisso, caudaeque pilos ut equinae paulatim vello unum, demo etiam unum, dum cadat elusus ratione ruentis acervi, qui redit in fastos et virtutem aestimat annis miraturque nihil nisi quod Libitina sacravit. Hos ediscit et hos arto stipata theatro spectat Roma potens; habet hos numeratque poetas ad nostrum tempus Livi scriptoris ab aevo. Interdum volgus rectum videt, est ubi peccat. Si veteres ita miratur laudatque poetas, ut nihil anteferat, nihil illis comparet, errat. Si quaedam nimis antique, si peraque dure dicere credit eos, ignave multa fatetur, et sapit et mecum facit et Iova iudicat aequo.Non equidem insector delendave carmina Livi esse reor, memini quae plagosum mihi parvo Orbilium dictare; sed emendata videri pulchraque et exactis minimum distantia miror. Inter quae verbum emicuit si forte decorum, et si versus paulo concinnior unus et alter, iniuste totum ducit venditque poema. =\alg Fme jg ) 9njad *((1 =@E8E:@E> KF JD =@E8E:< =FI 8=I@:8ËJ JD8CC =@IDJ Paul Collier, Centre d’études des économies africaines de l’Université d’Oxford HL8E; CË8JPDyKI@< ;< H @E 8=I@:8 ;< CË@E=FID8K@FE EL@K Ê`gmd]mk]kË Admassu Tadesse, Development 8L =@E8E:yJ ca and Mauritius, 8LJJ@ ;< :8G8:@KyJ which have developed financial tion, the pace of progress has been faster in the systems.Yet strides have been made over the rest of the world. This is a source of concern. There Paul Derreumaux, Bank of Africagreat Grégoire Chauvière Le Drian last decade and this has helped boost GDP growth has been much analysis on how to deepen finanPage 15 & Hervé Gallèpe, Agence rates in SSA countries. Since most of these cial intermediation in Africa in order to scale up Française de2000, Développement Page 6 countries have seen higher growth rates for privaPage 22 te sector credit than for nominal GDP. The trend is encouraging and has been underpinned by lower inflation in most African countries and headway in liberalizing interest rates and foreign exchange markets which has given banks more flexibility to mobilize and allocate financing to creditworthy borrowers. 8]i`ZX cX^^è^ Emilio Sacerdoti Advisor, African Department, IMF Emilio Sacerdoti, Laurea in Economia e Commercio, Bocconi University 1969, PH D Yale University, 1975, economist at Banca d’ Italia 1973-75, assistant to Italian Executive Director at the IMF 1975-78, economist and senior economist in the IMF 1978-1985, division chief and advisor in various Fund Departments. since 1988, mission chief to numerous African and Middle Eastern countries, most recently mission chief to Madagascar, Gabon, Tunisia, Niger. 0 access to credit, especially for small and mediumsized enterprises (SMEs). What is needed is more reliable systems for collateral, land titles and credit guarantees, that must give sufficient security to creditors; better information systems must be implemented via well -developed credit bureaus; leasing needs to be developed by removing legal and judicial constraints that hamper repossessions; tax rules that prevent lessors from deducting capital depreciation as well as taxes applied to the repayment of principal by lessees must be suppressed; mutual guarantee schemes need to be developed so that SMEs can benefit from the support of other members; instruments are needed to mobilize long -term savings that give longer terms for investment financing; swifter judicial credit recovery procedures are required and judicial systems must be more equitable in terms of debtor protection and creditor claims. Yet despite these encouraging results, the ratio of credit to the nongovernment sector to GDP remains relatively low. In most SSA countries, even those where growth performance has been high over the last decade (Benin, Burkina Faso, Ethiopia, Ghana, Mali, Mozambique, Niger, Rwanda, Tanzania, Uganda, Zambia…), the ratio of bank private sector credit to GDP was still under 20 percent in 2007 (see attached Table). Indeed, in 2007 few SSA countries reached ratios of over 20 percent: Botswana, Kenya, Nigeria, Senegal, Swazi- J`êj f] gifî\jj land and Togo (20 to 25%), Seychelles (35%), Cape Over the last decade the African continent has Verde and Namibia (roughly 50%), and Mauritius made headway in reforms to improve legal, administrative and judicial arrangements in these and South Africa (over 75%). In contrast, over the last decade this ratio has risen areas. But progress has been uneven. Credit inforsharply in many of the world’s emerging market countries where financial intermediation had previously tended to be low. In Latin American and Asian countries such as Brazil, Costa Rica, Colombia, Mexico, India and Sri Lanka, ratios were low in 2000 but have risen by half and in 2007 topped the 40 percent mark in most cases. Central and The views contained in this paper are Eastern European countries, where ratios were those of the author and should not be also low at the turn of the decade, have experien- attributed to the IMF, the Executive Board ced a credit boom which has pushed the ratio over or its management mation systems have been established in Kenya, Tanzania, Uganda, Mozambique and Zambia, although there is still room for improvement in their operation, as well as in the legal environment allowing for access to this information to non banking institutions. Accounting standards have improved in many countries and have thus strengthened account transparency. An example is the introduction of the SYSCOA uniform accounting system in Western African Economic and Monetary Union (WAEMU) member countries in 2001. The creation of a regional bond market in WAEMU countries and the start of a similar market in Central African Economic and Monetary Community (CEMAC) countries have also helped mobilize long-term financing; bond markets have deepened in Ghana, Kenya, Tanzania, Uganda and Zambia and have made it easier for larger companies and financial institutions to raise capital. SMEs may not have access to these markets, but they can benefit from their development via support from financial institutions and large firms that can enhance their financing. Payment systems have also improved throughout the continent, facilitating transaction settlements between economic agents. While these improvements are encouraging, there is still a long way ahead to bring the various institutional arrangements close to best practices. Credit information systems still need to improve in terms of coverage and access, Auditing standards need to be reinforced and the small size of markets – with some exceptions such as the WAEMU regional market or the South African capital market – still limits access to long-term financing. More progress towards establishing regional capital markets, such as the efforts underway in the East African Community, will help create deeper capital markets. Due to the limited bond market, regional development banks such as the BOAD in the WAEMU, the BDEAC in the CEMAC area as well as some public national development banks, play an important role in providing long-term financing. The risk is that non-economic factors may influence these institutions’ credit allocations. Moreover, these large institutions are not sized to target SMEs and can at best have an indirect effect on SME financing via financing for large firms. 9Xeb Zi\[`k kf gi`mXk\ j\Zkfi Xj X iXk`f kf è 8e^fcX 9\eè 9fkjnXeX 9libèX =Xjf 9lile[` :Xd\iffe :Xg\ M\i[\ :\ekiXc 8]i`ZXe I\g% :_X[ :fdfifj :fe^f# ;\d% I\g% f] :fe^f# I\glYc`Z f] : k\ [Ë@mfì\ lè\X XYfe >XdY`X# K_\ >_XeX >lè\X >lè\X$9`jjXl B\epX C\jfk_f DX[X^XjZXi DXcXn` DXc` DXli`k`lj DfqXdY`hl\ EXd`Y`X E`^\i E`^\i`X InXe[X J f Kfd Gi eZ`g\ J\e\^Xc J\pZ_\cc\j J`\iiX C\fe\ Jflk_ 8]i`ZX JnXq`cXe[ KXeqXe`X Kf^f L^Xe[X QXdY`X Q`dYXYn\ (&&& (&&- (%) ('%()%, ('%0 (.%) .%/ */%( +%* *%, /%+ '%. ,%/ (,%' )%. )-%, (.%0 /%* ((%, (%) *%, .%) ),%) (*%0 /%( +%(,%' ,-%. (%, +)%* +%('0 0%, +%) (-%, (,%+ (%0 -+%, ()%' *%0 (-%' ,%, -%. (+%*( .%0 (.%(.%0 (-%/ )'%( /%0 ++%, -%+ )%. ,%. )%/ )%+ (+%. )%, )+%(.%* ('%) (+%0 (-%/ -%) +%0 ),%* 0%' 0%' -%) (.%) .-%. (%) ,,%/%/ (/%* ('%) ).%( )(%/ *(+ +%, .,%* )*%( ()%+ (/%/ 0%('%' (,.%) Fme jg ) EYa *((1 C< =@E8E: =@E8E:< =FI 8=I@:8ËJ JD8CC =@IDJ Paul Collier, Centre d’études des économies africaines de l’Université d’Oxford Page\ n]dghh]e]fl \]k 9 HE=$ d] hjaf[ahYd ;FEEy @E 8=I@:8 \Yfk d]k HE= mf l]jjYaf [gfgeaim] Admassu Tadesse, Development hjge]ll]mj& Page 4 :I<;@K KF K?< GI@M8K< J<:KFI @E JJ81 ;yJ 8LJJ@ ;< :8G8:@KyJ des défis du XXIème siècle. Un défi dans la dans les pays en développement. Mis à part les atPaul Derreumaux, Bank of Africa Grégoire Chauvière Le Drian mesure où nous sommes en proie à une pro- tributs sociaux et catalyseurs d’efficacité, ces derPage 15 Hervé Gallèpe, Agence fonde crise & économique mondiale ou parce que nières ont en outre l’avantage de puiser dans les l’Afrique et, Française dans une large mesure, l’Amérique la- ressources locales disponibles, de réduire les transde Développement L /( It is probably fair to say that progress has been I<=lc[\# 8ee\ DXi`\# :Xk_\iè\ GXkk`ccf \k AXZfY :_i`jk\ej\e )''- # Sub-Saharan Africa, strengthen title regimes, particularly land titles, Financial Sector Challenges, Fonds Monétaire International, Washington, D.C. speed up collateral recovery procedures and enfor- ) ¾ JXZ\i[fk`