it is then the task of the central bank to ensure that new payment services adhere to the security requirement desired by businesses, households and financial institutions. 4. financial sector development third, let ’ s take a brief look at financial sector development. an efficient and deep financial sector provides enterprises with debt and equity to finance their growth, thus spurring economic activity. at the same time a deep financial sector can provide households with savings and credit products to smooth their consumption patterns, again increasing their return from economic activity, and reducing poverty. to what extent have financial sectors grown and become more efficient in africa in recent years? figure 4 displays the volume of private credit, as a percentage of gdp, for south africa, other sub - saharan countries and for northern africa. with credit exceeding gdp, the financial sector in south africa boasts a similar size to that of many north american and european countries. by contrast, the financial sector is very shallow in the rest of subsaharan africa, with credit volumes at less than 20 % of gdp. even more worrying is that the financial sector has hardly deepened over the past 15 years. figure 4 : private credit / gdp in africa ( in % ) 160 % 140 % 120 % 100 % 80 % 60 % 40 % 20 % 0 % 1995 1996 south africa northern africa ( median ) 2002 2003 sub - saharan w / o sa ( median ) continuing this undoubtedly bleak picture, we see that the financial sector in sub - saharan africa has become neither more efficient, nor more competitive in recent years. figure 5 displays the nominal rates at which banks lend money, as well as the rate they pay for deposits. lending rates have stayed more or less constant from 1993 to 2005. since inflation has decreased substantially over this time, the real interest rate that banks charge has actually increased. by contrast, the nominal deposit rate has decreased, so that the real deposit rate has been constant. together this implies that the interest rate spread charged and earned by banks has increased substantially in the last 15 years. figure 5 : lending and deposit rates in sub - saharan africa ( w / o sa ) deposit rate ( median ) lending rate ( median ) what can african central banks do to foster deeper and more efficient financial sectors? in most african countries, central banks are responsible for regulating and supervising banks. here central banks should ensure that regulatory requirements are not prohibitive for new market entrants, particularly foreign financial institutions who may bring cheaper capital and new technology to the sector. moreover, central banks can

foster the development of sustainable microfinance and rural financial institutions to cater to the vast agricultural and microenterprise sector. they can do so by adopting regulatory requirements which suit the limited sphere of activity of these institutions. 5. conclusion ladies and gentlemen, let me conclude these brief introductory remarks. how can we assess the contribution of central banks to improving the business environment in africa? most african central banks have been successful in reducing inflation. this enables the private sector to plan ahead and engage in contracts without worrying excessively that their proceeds may be eroded by rapidly rising inflation. central banks have also fostered improvements in the payment system, which have reduced the costs of accessing and transferring money for businesses and households. the cash intensity of most african economies suggests, however, that there is still room for improvement in this area. a greater challenge for central banks lies in fostering growth and efficiency in the financial sector. the banking sector in many countries of the continent remains small and sadly displays a low level of efficiency and competition. i sincerely hope that this forum will contribute to finding solutions to these and other challenges to emerging africa. let me close by wishing you a successful emf here at the study center gerzensee.