Africa financial industry shaky, focus on resilience, says ex-CBK Governor

The latest Africa Financial Industry Barometer has revealed a concerning picture of the health of the financial sector on the continent. CNBC Africa's Aby Agina recently spoke with Dr. Patrick Njoroge, Kenya's immediate former Central Bank Governor and chair of the AFIS Advisory board, to delve into the key findings of the survey. Dr. Njoroge highlighted several key points emerging from the survey, shedding light on the sentiments and concerns of industry players.

The survey, which gauged the sentiment of respondents within the financial sector, showcased a mixed bag of optimism and caution among different subsectors. Fintech companies emerged as the most optimistic, while capital markets took a more cautious stance. The overarching concern among respondents was inflation, with macro stability being a significant point of worry. This signals a pressing need for stability and predictability in the economic landscape.

One of the most notable findings was the declining attractiveness of the financial sector, with a majority of respondents perceiving a decrease in its appeal to both local and international investors. Geo-political factors, security issues, and global instability were cited as contributing factors to this trend. Additionally, the survey highlighted the urgent need for digitization across all subsectors of the financial industry, with respondents identifying it as a top priority. However, the adoption of artificial intelligence projects remained low, indicating room for growth and advancement in this area.

The survey also touched on the ongoing initiatives for economic and financial integration across Africa. While some projects were deemed significant by a portion of respondents, others were met with less enthusiasm, signaling a need for increased cohesion and alignment in integration efforts. The importance of governance in the sector was underscored, with positive strides observed in board-level governance practices. The prevalence of independent directors in organizations was noted as a positive development, showcasing an improvement in governance structures.

Despite these advancements, concerns lingered regarding the adaptability of regulatory frameworks to innovation. A majority of respondents expressed dissatisfaction with the regulatory clarity and requirements, particularly in capital markets. Fragmented regulations across regions and the lack of convergence were identified as hurdles to seamless operations in the financial sector.

In a bid to address these challenges and uncertainties, Dr. Njoroge emphasized the theme of resilience as a cornerstone for the industry's future. Stakeholders stressed the need to focus on talent, capital, infrastructure, and policies to fortify business models and navigate external shocks effectively. The conversations at the Casablanca office meeting highlighted the urgency of strengthening capital bases, innovative financing, and efficient resource deployment for sustainable growth.

Looking ahead, the global economic environment presents a myriad of uncertainties, with shifting geopolitical dynamics and monetary policies impacting African economies. Dr. Njoroge acknowledged the potential spillover effects of US monetary policy decisions on the region, emphasizing the need for vigilance and preparedness. The looming specter of high interest rates and inflation underscores the importance of proactive measures and strategic planning to mitigate risks and safeguard against external disruptions.

In conclusion, the challenges facing the Africa financial industry necessitate a concerted effort towards building resilience, fostering innovation, and enhancing regulatory frameworks. By addressing these key areas and capitalizing on emerging opportunities, stakeholders can steer the sector towards sustainable growth and stability in the evolving global landscape.