The East African Community (EAC) needs a strong and uniform regulatory framework that promote financial inclusion to ensure sustainable growth in the region, experts say.
Prof Lemma Senbet, from the African Economic Research Consortium (AERC), said EAC should put in place clear systems that promotes financial inclusion to spur growth.
He added that a regionally integrated financial system that also feeds into a global system will help strengthen the financial industry on the continent.
He also noted that a strong linkage between the financial industry and other sectors of the economy is crucial for Africa.
“It is important to have a globally competitive financial system and regulatory framework to ensure best practices,” he added.
He was speaking during a China-Africa Media Think Tank symposium in Mombasa, Kenya recently.
Prof Humphrey Moshi, the Centre of Communication Skills at the University of Dar es Salaam, Tanzania, said there is need to create linkage between financial sector development and poverty alleviation, as well as employment creation.
He said it is essential to develop the capacity of the financial sector to exploit its potential and contribute to the region’s growth.
“There is need to strengthen capacity of financial systems to perform multiple functions and not mere existence of the systems,” he added.
“Sub-Saharan African countries, including the EAC bloc, have undertaken a lot of economic and financial sector reforms over the last two decades, yet many still face a severe financial development gap compared to advanced and other developing economies,” Prof Moshi said.
He added that lack of access to finance by disadvantaged groups is one of the main obstacles to the sector’s growth. He noted that access to funding could promote broader economic growth.
Boosting trade relations
Africa is looking more to the east particularly China, for trade and investment partnerships, shifting from traditional western partners.
Michael Ehizuelen Omoruyi, of the Institute of African Studies at Zhejiang Normal University in China, said Africa’s low competitiveness in international markets affects trade between the continent and the rest of the world.
“Therefore, diversification and continuous industrial growth are key, and African countries can grow as dynamically as developing countries in East Asia and other parts of the world if governments put in place an enabling environment to attract FDIs and skills,” Omoruyi said.
“African nations need to move faster and woo major companies to invest on the continent,” Omoruyi said.
Meanwhile, Prof Meibo Huang, from Xiamen University in China, has said strong monetary ties with development partners could help accelerate economic growth in the region. However, Huang said lack of access to finance remains a big challenge to sustainable economic growth in the region and on the continent, generally.
He said it makes it imperative to maintain strong monetary co-operation and to engage stakeholders in finance development programmes.
He argued that co-operation with development partners is still at an early stage and unbalanced.
“It is, therefore, critical to balance this co-operation through strong overseas credit lines to boost economic growth,” Haung said during the symposium.
He said the China-Africa Development Fund has invested $3.2 billion in 83 projects in 35 African countries. This is expected to drive Chinese enterprises to increase African official foreign direct investments to about $16 billion in the next five years.