Banking in Africa: The Impact of Financial Sector Reform Since Independence.

This book is a history of the financial sector in African countries since freedom from colonial rule and the right to manage their own affairs was gained. It is written as an unusually clear and accessible narrative. Careful to point out the limited value of generalisation, the introduction offers a useful overview of developments in many African countries, identifying two key phases of banking reform - one which occurred in the aftermath of independence and one, attempting to reverse the first, which took place approximately 30 years later. Following this, the book is divided into eight chapter-length case studies of financial sector reforms, in Botswana, Ethiopia, Ghana, Kenya, Nigeria, Uganda, Zambia, Zimbabwe; and one chapter which examines together in less detail developments in Tanzania, Malawi and The Gambia.

Unsurprisingly, the true financial motives of imperialism were starkly visible in the various regimes' administration of the banking sector. As such the sector came to represent a focus for popular African protest, and the lending policies of foreign banks, which effectively excluded African-owned businesses and borrowers, were consequently widely denounced. Banking in Africa explains how, in the decade immediately following independence, the new nationalist leaderships sought to dismantle these systems, which they perceived as unjust and contrary to true development objectives. Different strategies, expressing the different political philosophies of the key actors in this process as well as differences of local circumstances, were employed from country to country to achieve this same end. Within this, extensive government intervention in the sector is identified as a constant, negative factor by Brownbridge and Harvey, across Africa (with the exception of Botswana). The blurred distinction between government-owned commercial banks, and the government treasury, gave rise to the now familiar pattern of bad debts and bank distress, which process the authors describe dearly and concisely in all its manifestations, citing in the case-study chapters the histories of particular principle banks as examples.

Adverse external shocks

In the introduction, the economic crisis which beset the African continent in the 1980s, as a result of 'adverse external shocks and mistaken policies' is also described. Following The World Bank's influential Berg Report, most African countries adopted or had imposed upon them Structural Adjustment Programmes which broadly-speaking encompassed market-oriented policy reform. Whilst these did not initially target the financial sector per se, by the late 1980s and 1990s, many countries were starting to address the problems of government-directed lending and monopoly, and insolvent banks. The authors argue that despite this trend towards liberalisation, the distortions wreaked in the sector by the first set of reforms, and the fact that the second reforms were implemented as a response to economic crisis and thus in a context of great macroeconomic instability, conspired to undermine their impact.

The authors offer detailed accounts of how diverse policies regarding interest rates, credit controls, foreign exchange, supervision and so forth affected specific banks and the economy at large in the case-study countries. By this method they chart the range of experience of the financial sectors of African countries, from the politicised government-controlled market economy of Nigeria, to the socialism of Tanzania, seeking to explain why similar reforms fared differently in various countries, thus shedding light on the current and future state of banking in Africa.

The book concludes that reform of the financial sector in Africa failed miserably to achieve its initial objective of assisting development. Whilst implicit acknowledgement is given to the enormous difficulty of surviving an abrupt entry to the global economy and shedding the shared shackles of imperialism, the authors are not concerned with rhetoric or special pleading. Rather than assessing any right or wrong, past or present, Banking in Africa focuses instead on the minute detail of financial sector development - consequently the book represents a quiet and useful attempt to chart the history of this crucial sector in any modern society, whose health is an essential pre-requisite for a country's well-being.

Reviewed by Jessie Banfield James Currey [pounds]16.95 ISBN 0-86543-693-29