27. Bond Market Development in Africa: A Review

Bond markets an integral part of the capital market have recorded steady growth in recent years across the globe. However, in Africa, they remain largely underdeveloped, with corporate bond markets non-existent in some countries or in their infancy in others. Policymakers play a key role in improving the bond market, and this requires a vivid understanding of the scope, dynamics, and development of the existing market in Africa. This chapter provides a review of the theoretical and empirical literature on bond market development in Africa. It expatiates on issues like the importance of the bond market, the constraints it faces as well as its determinants. The review suggests that while Africa’s bond market is relatively shallow and less penetrated, it is as competitive as those in other developing and emerging economies. Also, bond markets are, in many ways, less integrated than those in the industrialized and developing regions of the world. Given the many challenges facing the development of African bond markets, some important steps are proposed to achieve an efficient financial sector and to improve and sustain the development of African bond markets. In this regard, a comprehensive regulatory framework and progressive regional integration of capital markets can thus, help achieve bond market development goals. In addition, a more inclusive partnership with developed markets is needed in the ongoing and planned sustainable bond development initiatives in order to leverage synergies and maximize the effectiveness of the initiatives.