The Cost of Financing in Africa: Policies to Reduce Cost and Enhance Financial Inclusion

This paper analyzes the cost of financing in Africa and identifies policies to reduce this cost and enhance financial inclusion in the region. After a brief overview of financial inclusion in Africa, it describes the trends of interest rate spreads in the region and analyzes its components. To tackle the underlying causes of these high interest spreads and improve financial inclusion, we presents a wide set of policy reforms. Policy makers should prioritize the reforms that can have the biggest impact based on country circumstances. Nevertheless, enhancing financial inclusion requires a broader set of reforms as cost is not the only obstacle limiting financial inclusion in Africa and other financial products are also relevant to reduce poverty and increase shared prosperity.