Africa Region Working Paper Series No. 43

Analyzing Financial and Private Sector Linkages in Africa

Abayomi A. Alawode,

Abstract

This paper contributes to improving financial sector analysis in Africa by developing a framework for analyzing financial and private sector linkages in the Region. Analyzing such linkages has become more important given the central role assigned to the private sector in most Poverty Reduction Strategy Papers (PRSPs) in Africa and the need to foster financial sectors supportive of private sector activities and real sector development.

In developing this analytical framework, the paper uses a case study of a fictional African country named Sahara Republic to provide a practical illustration of the most important aspects of the relationships between the financial and private sectors. This analysis is done primarily from the perspective of the financial sector, with the ultimate aim of identifying relevant interventions to increase the contribution of the financial sector to private sector development and economic growth. It is however recognized explicitly that some private sector interventions will also be necessary in order to make the private sector more attractive to financial intermediaries and markets.

It is expected that this proposed analytical framework will serve as a useful diagnostic tool for World Bank-IMF staff and consultants involved in the evaluation of financial and private sector linkages in Africa, either as part of the Bank-Fund Financial Sector Assessment Program (FSAP) or as Task Team Leaders involved in designing and implementing financial sector development projects in the Region. Private sector specialists working on private sector development assignments in Africa could also find this useful. Most importantly, we expect this exercise to stimulate other efforts to develop appropriate frameworks and tools to support sound financial sector analysis in Africa.

Full text of paper. (735KB, In Adobe Acrobat format. Requires Acrobat PDF viewer)