countries—with three quarters (18) of the countries having ratios below 20 percent (eight of which have ratios of less than 10 percent). Bank credit to the private sector in these countries has been constrained by various structural impediments to lending that can include, inter alia, poor credit discipline, deficiencies in national legal and judicial frameworks, administrative controls on lending rates, and high transaction costs.

With the exception of South Africa—which has a financial sector that is significantly larger and more developed than those of all of the other African focus countries—the ability of commercial banks in the focus countries to finance infrastructure projects is thus impeded. In addition to the structural constraints to lending noted above, there would be a significant asset-liability maturity mismatch in the case of most banks in the region, given that African banks’ deposits and other liabilities currently tend to have largely short-term maturities, while infrastructure projects require medium- to long-term financing. Longer-term deposits are needed to finance longer term credit commitments. Moreover, structural constraints to lending in some of these countries make banks highly risk averse. Lending to the private sector thus tends to be generally short in tenor. In financial markets where banks make credit available at medium- to longterms, they often concentrate their lending to a select few, large corporate blue-chip borrowers.

Even for the five focus countries (in addition to South Africa), where long-term loans with maturities greater than 20 years are available (Ghana, Lesotho, Namibia, Uganda, and Zambia), average interest rates exceed 20 percent in two of these countries (Ghana and Zambia), thus rendering them hardly affordable for infrastructure lending purposes. This is because it is difficult to find infrastructure projects that generate sufficient returns to cover a cost of debt that is greater than 20 percent.

Despite the overall scarcity of affordable medium- to long-term financing from banks, the share of bank loans used to finance infrastructure in the focus countries has been on an overall upward trend in recent years. In 12 of the 20 countries for which time-series data are available, there was an increase in bank loans outstanding to sectors that develop infrastructure, relative to total loans. At the same time, it must be noted that these figures vary widely from country to country, however, and the absolute amount of lending is relatively small, with the exception of South Africa and Nigeria. Excluding South Africa, the total amount of outstanding loans to infrastructure sectors for all the other 22 focus countries for which recent data are available is just $5 billion—roughly equal to the corresponding amount for Malaysia alone and well below the corresponding amount for Chile alone.

The sector known in many national accounts as “transport, communication, and storage” was the destination of the largest amount of local bank loans outstanding at the end of 2006 for the 23 focus countries that reported such data: just over $8.3 billion, or nearly three-quarters of the $11.3 billion in total loans outstanding for infrastructure financing for all countries reporting these data. Electricity, water, and gas was the destination of the next-largest amount by overall sector category: $2.7 billion, or just under one-quarter of the total bank loans outstanding for infrastructure financing.

For the majority of the 24 focus countries, however, the capacity of local banking systems would be too small and remains too constrained by structural impediments to adequately finance their infrastructural development needs. There may be somewhat more potential in this regard for syndicated lending to infrastructure projects with the participation of local banks, which had been on an overall trend of increase in recent years, albeit with significant variability across the countries and from a very low 62