Published on September 8, 2016

Credit on the cusp: Strengthening credit markets for upward mobility in Africa


Enthusiasm around the once-popular “Africa Rising” narrative is abating in the face of slower-than-expected growth, macro volatility deriving from continued reliance on raw material exports in many countries, and the reality of persistently high inequality. Even through a period of high growth, we did not see large numbers of people move into the middle class (typically characterised by stable jobs, budgets with space for expenditure beyond pure necessities, and the possession of collateraliseable assets like land, homes and cars).

Instead, we observed a shift from absolute poverty into a “cusp” group getting by on about $2-$5 per day. This group straddles the formal and informal economies, and while they strive for a stable middle-class future, they remain vulnerable and largely lacking in meaningful assets. The group is large— cusper households encompass nearly a quarter of Africans today—and politically important. Their successful entry into the middle class—a real engine for sustained growth via domestic markets—is by no means guaranteed. Credit markets play an important role in shaping that destiny.

Whether credit is available to cusp borrowers and the nature of its effect on their lives depends on the health of local credit markets, which are changing substantially in the face of rapid urbanisation, persistent inequality and informality, technological transformation, and perpetually weak state institutions. 

Given major shifts taking place in African economies, how can donors and policymakers guide credit market development in a way that strengthens the economic well-being of the cusp group over the next 10 years? FSD Africa, which exists to help strengthen financial markets in sub-Saharan Africa, commissioned this research to seek answers to this question through the experiences of cusp group consumers, and the lenders serving them, in three distinctive markets: South Africa, Ghana and Kenya.

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