Adequate, appropriate finance is crucial for Africa’s sustainable development. Its availability depends on African countries developing financial systems that can effectively draw on and deploy to best use domestic and international, private and public sources. With the growing importance, in particular, of both domestic sources of finance, and private investment (both domestic and international), it is critically important that Africa’s financial and capital markets develop in ways that will promote sustainable development on the continent.
Aligning a financial system with sustainable development does not happen automatically. The increasing scale and sophistication of Africa’s financial system alone will not achieve it. Indeed, the international evidence amply demonstrates that financial and capital markets can — and often do — become detached and fail to adequately serve the long-term needs of inclusive sustainable development.
Innovative financial and capital market policies, regulations and standards can improve the alignment of the financial system with sustainable development. Lessons from developing countries in particular highlight the potential roles of central bankers, financial regulators and financial policymakers in delivering financing for sustainable development.
The UNEP Inquiry into the Design of a Sustainable System is identifying and distilling many of these innovations to enable them to be more widely and effectively adopted. Initiated in early 2014, the Inquiry will complete its work in late 2015, but can already highlight a portfolio of promising innovations, including those drawn from experience in Africa. A number of high potential areas are identified in this briefing, including specific developments in disclosure, credit risk management, fiduciary duties, lender and investor liability and bond markets.