It is often argued that having a stable banking sector is crucial for a country’s development. This may be true, but it only applies if lenders have the capacity to contribute to economic growth.
In Africa, plenty of banks lack that capacity, owing to their small size. Across the continent, there are countries with far too many lenders for the size of their economies. Tanzania, with a gross domestic product (GDP) of just $35bn, has 34 commercial banks. Its northern neighbour, Kenya, has more than 40. Perhaps the starkest example is the west African CFA franc zone. Its eight countries, with a combined GDP of about $80bn, have 106 banks.
