Minister Blames Banks over Poverty in Africa

Tuesday, November 8, 2005

The failure by commercial banks to lend to small and medium-sized businesses in Africa is to blame for rampant poverty on the continent, a Cabinet minister said yesterday.

Planning minister Anyang’ Nyong’o hit out at the banks for making return on investment difficult by charging high interest rates on loans.
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“The banks rarely touch African businesses and when they do they charge interest rates that make it impossible for entrepreneurs to make a return on their investment difficult,” he said.

The minister said commercial banks were only interested in making profits from poor Africans without helping them improve their businesses.

Nyong’o dismissed managers of such banks as shortsighted people who did not understand that helping the poor to do business is the surest way to increase their customer base.

The minister also took African leaders to task over the poor standards of living on the continent, saying bad governance was to blame. “In most cases, the leadership is to blame because they do not the value of cultivating good commercial values and practices,” Nyong’o said. “The situation is not made any easier by the chequered history of political patronage that makes it impossible to select the best managers for public corporations,” he said.

The minister said gross mismanagement of public corporations had forced governments to sell them to private investors at below market prices.

He however appealed to rich nations to finds ways disbursing loans directly to small entrepreneurs who have been locked out of commercial banks.

The minister said micro finance institutions had failed to meet Africa’s financial needs because they had failed to serve middle commercial enterprises.

Nyong’o was speaking at Whitesands Hotel in Mombasa at the opening of the fifth African Venture Capital conference.

The conference has drawn 300 participants from the venture capital and private equity sub-sectors. African Venture Capital (AVCA) is an organisation with the objective of promoting high ethical standards and professional competence in the lending business.

Among the delegates is Celtel chairman of Dr Mohamed Ibrahim and the Managing Director of KenGen Eddy Njoroge.

Ibrahim said the investment climate in Africa had changed for the better and cautioned investors not to be discouraged by claims of rampant corruption in the continent. He said his company was a good example of the value that investors can get from Africa.

Ibrahim said Africa yielded the highest rate of return on investment despite being regarded as risky destination.

He said those who ignored Africa in their investment decisions only did so because of ignorance.

Source: The East African Standard (link opens in a new window)