An Assessment of Regional Development Banks in Sub-Saharan Africa

Abstract

The purpose of this study was to assess development banking in Sub-Saharan Africa specifically focusing on the EAC, COMESA and SADC economic regions. The study focused on the following specific objectives: to determine the impact of RDBs on GDP Growth and to assess the changes in RDBs affecting the region of operation. For the purposes of this study, descriptive research design was used. The total population of the study consisted of four development finance institutions operating in the specified area. Being that the total pollution was relatively small, a census was carried out. The data was collected using data collection forms. The data analysis for this study was done using descriptive statistics. The data was analyzed and the results presented thought averages and percentages using graphs and tables to as to clearly correlate the relationships between variables. Microsoft excel was used as a tool of analysis for the data gathered for this study. In the determination of the impact regional development banks have on GDP growth in the region, the study found that regional development banks’ interventions had a positive impact on the GDP growth rate of the region. In each of the years covered in this study, countries who did not record any intervention from RDBs showed lower cumulative average in GDP Growth rates than the average GDP growth rates of the countries that had an intervention from one of the four regional development banks. In determining the operational changes in RDBs in response to the region’s needs, the results of the research showed that there was a clear correlation between a slowdown in GDP growth and an increase in RDBs intervention into the financial sector. It was noted that in 2009 and again 2011 when the GDP growth rate of the region slowed there was in increase in financial sector interventions. It was also noted that throughout the focus time period the percentage sectorial focus intervention in industry and mining as well as infrastructure remained relatively constant. The conclusion of this study was that regional development banks have a significant impact on the countries they operate in both thought overall impact on economic growth as well as targeted sectorial development. Being that most African nations do not have a sovereign credit rating, access to finance in the international markets was difficult and relatively expensive. Regional development finance institutions provided services to fill the gap in international financial markets. They were based close to their area of operation and thus could react quickly to the needs of the region while also understanding the unique needs of the region. On the bases of the results of this research, sub-Saharan countries benefit from membership to regional development banks as was noted, countries that had interventions from RDBs had higher economic growth than those that did not. It is thus the recommendation of this study that countries asses their needs and get membership to regional development banks so as to take advantage of the products and services they provide. Furthermore it is the recommendation of this research that further study into the level of impact different sectorial interventions have on economic growth in the African continent. Furthermore, it would be of interest to the academic fraternity to compare and contrast regional development banks around the world and their impact as well as the sectorial distribution of their interventions.