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Financing the frontier: inclusive financial sector development in fragility-affected states in Africa

Poverty in sub-Saharan Africa (SSA) is reducing, but the concentration of extreme poverty in fragile states is likely to increase, according to a new report published by the Financial Sector Deepening Africa in partnership with Mercy Corps. The report concludes that the donor community can crowd-in legitimate financial market actors and provide the flexibility needed to take risks, and allow development actors to pivot as the fragility-affected states in Africa (FASA) change and adjust. SSA has one of the world’s highest refugee and internally displaced populations – over 19 million people in 2016 – and the numbers are rising due to new and ongoing crisis in several countries. According to the report, SSA has 483 million people living on less than US$1.25 per day, representing a poverty gap three times the level of South Asia. Poverty rates in fragile states are, on average, 20% higher than countries with comparable levels of economic development; the gap is widest for countries affected by repeated cycles of violence. Finance plays a crucial role in poverty and conflict cycles, as lack of equitable access to financial services can lead to underdevelopment and stagnation, exacerbating social and economic unrest.