Feature interview with Stefan Nalletamby
4 February 2014
Director, Financial Sector Development (OFSD), AfDB
Mr. Nalletamby, our readers would like to know the importance of the Financial Sector Department (OFSD) within the African Development Bank (AfDB). Could you shed some light on OFSD’s mandate?
The OFSD mandate is to help regional member countries in increasing the reach, depth and breadth of their financial sectors. Our mission is to support the development of a vibrant private and public sector by improving access to financial services, empowering financial system participants, developing efficient capital markets, and deepening regional financial integration. Our principles are focused on ensuring government and community ownership of the Financial Sector development agenda.
In carrying out the mission of OFSD, what are the challenges you anticipate and objectives to be achieved?
I believe the financial sector in many of our regional member countries is facing a long list of challenges. Africa lacks appropriate financing vehicles, uncompetitive and inadequate financial products, and outdated, and at times nonexistent IT systems. Moreover, financial sectors are dominated by Banks, with nascent or poor non-banking financial intermediaries, such as leasing and insurance companies and pension funds. Our objective is to scale up the AfDB’s intervention in this domain by supporting financial inclusion and leveraging technology, deepening MSMEs access to finance, strengthening regional financial integration, and developing long term finance.
Is the OFSD’s primary focus on financial inclusion or will there also be an emphasis on the development of Capital Markets?
This is a very interesting question. The focus will in fact be dual, knowing that the sustainable deepening of capital markets will be more effective if there is an increased push for enhanced financial inclusion that helps formalize the financial system. OFSD will support improving access to long-term financial markets and regional financial integration. This will be achieved through improving the payment systems infrastructure, supporting the development of long-term financial products for the regulated markets, and advising on financial sector reform programs. Also, OFSD’s two initiatives: the African Financial Markets Initiative (AFMI) and Making Finance Work for Africa (MFW4A), as knowledge management systems, will be instrumental in implementing the aforementioned activities. The AFMI contributes to domestic resource mobilization and bond market development on the continent through three main channels: the AFMI Data Portal, the planned African Bond Fund and African Domestic Bond Index. MFW4A is a partnership whose aim is to support the development of African Financial Sectors. It serves as a platform for African governments, the private sector, and development partners to coordinate financial sector development interventions across the continent.
How will Financial Sector Development help bridge the income inequality gap on the continent?
This is an area where OFSD can play a vital role. Government policies have a decisive impact on poverty alleviation. The AfDB can support and advise governments on how to improve the financial sector in order to improve and increase the availability and accessibility of financial products and services; leading to more credit and savings channels for businesses and individuals alike that will serve as tools to improve the overall quality of life. This can be done through four key areas, which are the focus of the financial sector department of the Bank: developing a regulatory environment that fosters opportunities for entrepreneurship and job creation; facilitating access to a broad range of financial services for firms and for households; mobilizing the private sector to offer better services, such as affordable finance and insurance; and supporting regional member countries in building robust financial systems that are resilient to shocks.