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EIB study highlights the impact of COVID-19 on African banks

EIB study highlights the impact of COVID-19 on African banks

AfricaBanking & FinanceCovid-19 UpdatesTop Stories

The European Investment Bank (EIB) has published a unique analysis of the impact of COVID-19 on financing across Africa. The Finance in Africa 2021 report surveyed 78 leading banks and financing institutions active across sub-Saharan Africa to examine the impact of the pandemic on banking and business lending, investigate how Africa’s financial sector is harnessing the digital revolution and detail the challenges and opportunities of green finance for banks. 

“Africa’s banks are crucial for ensuring access to finance which is essential for private sector growth and climate action. They also understand the unprecedented challenges triggered by the COVID-19 pandemic. The European Investment Bank is committed to supporting transformational private and public investment across Africa in close cooperation with financial sector partners,” said Thomas Östros, Vice President, European Investment Bank. 

The Finance in Africa 2021 report, written with the support of Making Finance Work for Africa (MFW4A), is the sixth study of Africa’s financial sector by the European Investment Bank. The new report explores how access to finance provided by banks, microfinance and private equity sectors have been affected and what long-term trends may impact private sector investment. 

“The COVID-19 pandemic has already prompted major changes in how business is conducted and has accelerated digitalisation trends that were already underway before the crisis but that were slower in adoption. This has unlocked new opportunities for African financial institutions to innovate and drive financial inclusion. African banks can also play an important role in society’s adjustment to climate change and contribute to its mitigation, for example, by including environmental risks in their credit and investment process or by incentivising clients for green investments. With this unique report, we aim to capture how the African financial sector has rapidly adapted to the COVID-19 pandemic, pointing to continuing challenges and highlighting exciting opportunities for climate finance and digitisation,” added Abdelkader Benbrahim, Making Finance Work for Africa Partnership (MFW4A) Coordinator. 

The detailed analysis of the impact of COVID-19 on financial intermediaries backed by a survey of bank lending across the continent concluded that Africa’s financial sector has remained stable but that private sector financing may recover slowly, with small business and micro-entrepreneurs being the hardest hit. 

The survey suggests that nearly 50% of African banks are most concerned about the quality of existing assets and more than 20% are most concerned about a reduced demand for financing and an increase in the risk of future lending. 

African financial sectors have displayed remarkable resilience during the COVID-19 crisis and a liquidity crisis in the banking sector was averted, as most banks were well capitalised before the crisis and policymakers reacted fast. 

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