Microfinance in Rural and Urban Africa: Reality, Context, and Challenges

This paper examines the microfinance scenario in Africa and presents recommendations for governments, regulators, development partners and the private sector to increase financial inclusion. The private sector has pervaded the African microfinance market. Currently, Governments make rules impacting microfinance. Majority of the population still cannot afford access. Capacity building is emphasized, but is still inadequate. Progress in credit registries and financial literacy is slow. Infrastructure, technology and innovative approaches need improvement. The paper states that governments should ensure understanding of the local financial market. Recommendations include:

• Governments should support local financial institutions and technologies that provide a range of products through relevant delivery systems;
• Governments should emphasize and implement consumer financial literacy, information flow, credit registries and market improvement efforts;
• Regulators should focus on financial inclusion, be flexible and ensure an enabling environment for those working towards financial inclusion;
• Development partners should provide complementary assistance;
• Private sector should help in providing capital, building infrastructure, developing new products, services and technologies, and improving human and institutional capacity.