Sustainable financing is critical to achieving the Africa we desire


Africa’s financial sector, particularly in banking, has witnessed significant positive developments, both innovative and disruptive. FILE PHOTO | SHUTTERSTOCK

Africa’s financial sector, particularly in banking, has witnessed significant positive developments, both innovative and disruptive.

These have been driven in part by unprecedented risk factors and consumer needs that have forced rapid reform.

Our recent history has been punctuated by natural disasters, resurgent conflict, a growing and ever-present threat of climate change, fuel inflation and food shortages.

The financial sector has, as a result, doubled down on its determination to play a leading role in supporting the continent's recovery and resilience in a sustainable and inclusive way.

Africa remains one of the world's most promising untapped banking markets with more than 700 banks, as highlighted in the Africa Finance Report of 2021.

As income levels rise, the African continent continues to be a more attractive market for various global banks and financial products.

These products and services penetrate deeper into a much wider consumer base, increasingly at the back of technological advances and access.

With the AfCFTA, this will only increase, as the world’s largest and youngest trading bloc takes shape.

According to recent data by Statista’s Research Department, the revenue of the banking sector in Africa amounted to $86 billion in 2012 and 2017 annually and is projected to increase to $129 billion in 2022.

As the banking sector in Africa continues to find more relevant and appealing value propositions, there is a huge demand for this to be delivered in an innovative way - catapulting banking services to accommodate stakeholders’ needs such as asset protection, tax benefit, fast-growing investment, attractive interest rates, and maintaining security.

All in a cost-effective and timely manner.

A key highlight is the increased consumer interest in ESG-linked financing.

Banks have recognised very early the importance of value-based banking and finance for all their stakeholders, which will ultimately also enable the sector’s overall success and contribute towards achieving the continent’s key environmental and sustainability objectives as set out in the African Union’s Agenda 2063: The Africa We Want.

Already, nearly 70 percent of banks in sub-Saharan Africa see green finance as an appealing lending opportunity.

When developing strategic plans, nearly 55 percent actively consider climate change. Furthermore, over 40 percent of African banks have staff dedicated to renewable energy only and 10 percent of companies have tailored their products to serve green finance.

ESG-focused trends are not new. A study by Jersey Finance which explored current trends in the banking industry found that while ESG investing has been gaining pace steadily over several years, the use of environmental, social and governance (ESG) factors in financing arrangements has seen a more recent surge.

Also known as sustainability-linked lending (SLL), this approach can enable borrowers to pay lower interest rates by meeting a lender’s key performance indicators.

Jersey continues to collaborate, support and work with the new IFCs across Africa sharing its experience, expertise, and knowledge, including in responsible, impactful, and sustainable finance.

The writer is the Director of Middle East, Africa and India Jersey Finance. 

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