Finance: Research, Policy and Anecdotes

I have discussed the issue of long-term finance in previous occasions (here and here). After many years of work, yesterday saw the formal launch of the website.  While not formally involved anymore, I was invited as panellist to discuss the importance of this initiative during the launch event. While the main focus of the event was to describe the website, with the available data, tools and country reports, we also discussed the importance of long-term finance as part of the overall financial deepening process and, more importantly, as critical for infrastructure, housing and private sector development in Africa. Unlike the development success stories of East Asia, African countries are unlikely to ever be able to exclusively rely on domestic savings for long-term financing and will have to attract foreign funding, both private and public. The bottleneck, however, is more in the intermediation capacity, in channelling funds to where it is needed most – this is both due to lack of adequate institutions, markets and products, but also due to missing ‘infrastructure’ to better manage risks, including effective collateral and credit registries. Another important element (and here we can certainly learn from the East Asian success stories) is an important role for private-public partnership, including public guarantees to lengthen the maturity of funding. While it is always tempting to try to identify the one silver bullet that will unleash a stream of long-term finance, it is a long agenda and in many aspects a very country-specific one.  It is therefore important to look at the two components of this initiative as complementary – the scoreboard, based on cross-country data, and the country diagnostics. Quantitative data can only go so far to produce a good picture – it is like a picture from 30,000 feet, which has to be complemented by on-the-grounds assessment, both with country-specific granular data and qualitative assessment.

If you want to change something you have to measure it first. However, it is not sufficient just to collect data and make them available, but these data have to become part of the conversation. So, having data and presenting them in a reader-friendly way is a necessary but not sufficient condition for informing the conversation on long-term finance. Dissemination is key, but also full of pitfalls, as I discussed here – specifically, the scoreboard is not about ranking, but about stock-taking, identifying bottlenecks and policies to address constraints.

Overview