Africa needs funding to address poverty through economic transformation and a concerted effort is needed to develop a structured-finance market on the continent
Despite the important strides many African countries have made in reducing poverty and improving quality of life over the last decade, recent years have seen reversals in the trends engendered by a pandemic that has imposed an unprecedented burden on the economy and society.
The structured-finance market emerged as an alternative avenue to raise funding when doing so is expensive or unavailable. The market was created due to regulatory constraints imposing restrictions on the ability of banks to invest in certain asset classes. However, the structured-finance market is not well developed in Africa except in a few countries.
Securitisation equally depends on stable macroeconomic and political conditions because a securitised asset will fail to generate the stream of cash flow needed to pay investors if conditions are not suitable. A significant shortfall in cash flow may cause a chain of events similar to the one that led to the 2007/8 global financial crisis triggered by default in the sub-prime mortgage market.
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