The Role of Financial Markets and Institutions in Private Sector Development in Africa

The private sector is mostly regarded as an important contributor to Africa's growth. However, the issue of finance has been identified as a major constraint to the development of the sector. This chapter provides a comprehensive review of the private sector in Africa and discusses how Africa's financial sector can make the private sector the engine of growth it is supposed to be. It catalogues the characteristics of Africa's private sector, its contributions to economic development and the challenges it faces. Furthermore, the chapter examines the role of finance in promoting private sector development in Africa and discusses the constraints to extending financial inclusion in Africa. The extant literature suggests the existence of a wide range of conventional and innovative funding sources for the private sector. In particular, innovative funding sources such as remittances, crowdfunding, structured trade finance, private equity and venture capital, green bonds, leasing and factoring, mobile money services and alternative capital markets for small and medium enterprises are advocated.