Inductional Realism of Credit & Capital Markets in Africa

Inductional Realism of

Credit & Capital Markets in Africa

Synopsis of a Feasibility Study of Credit & Capital Markets in Africa

Based on a Consultancy Report to the United Nations Economic Commission for Africa UNECA, Addis Ababa, Lecture updated 2014 Respublica Literaria CXIV, MMXVI –

 Costantinos Berhutesfa Costantinos, PhD

Abstract

An efficient and a development-oriented private sector provide the nourishment, which these markets require to grow and function effectively. The markets themselves provide the credit ingredients, which the private sector requires to grow, expand and contribute to development. Thus, there is a reciprocal and mutually productive relationship between the private sector on the one hand and credit and capital markets, on the other hand. The analysis further suggests that countries should incorporate the requirements of establishing capital markets and strengthening the private sector in the list of priorities on their macro-economic reform programmes. Primarily, the banking system must be firmly entrenched and functioning as efficiently as planned. This should take good care of the money market and hence the credit market needs of rudimentary private sectors. The consequential growth response of the latter should give a boost to capital markets, which in turn provide the capital for long-term and sustained development. The study provides ample evidence that this evolutionary process is well underway in several African countries.

The purpose of the study is to sensitize African countries on issues that are pertinent to the establishment of credit and capital markets. The dismal pace of developing credit and capital markets can be attributed to policies of colonial regimes where deliberately antagonistic to the evolution of a viable private sector, which was not intended to bring about the social and economic development and did not encourage the development and strengthening of capital markets. This study is predicated by the rationale that credit and capital markets can make positive contributions to the sustained and sustainable development of African countries. The aims of this study are to explore the feasibility of comprehensively developing and strengthening the capacity of financial and capital markets in Africa in order to promote entrepreneurship. The objectives of the study are to advance explicit clarification of the role of the private and public sectors in view of the interactive role of these sectors and the implications for capital markets development.

Key words: credit, capital, markets, finance, intermediation, banks, insurance, unions,

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