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Sub-Saharan Africa saw the steepest decline in lending to the private sector of any region in the 15 years up to 2022, the European Investment Bank said. It underscores a key development challenge for the continent.
Credit to the private sector as a percentage of GDP rose massively in other developing regions including East Asia and Latin America, but sub-Saharan Africa recorded a 20 percentage point drop.
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The sub-Saharan region should focus attention on the crowding out effect happening, where “excessive bank lending to the public sector” restricts credit to the private sector, according to the EIB’s latest Finance in Africa report.
The impact curtails the level of growth that can be spurred by the private sector. It also highlights the fact that the stock of private capital in Africa — especially those flowing from foreign investors — is failing to keep pace with the rest of the world, the report said.
