Invest in Africa?

When you study economics you find, especially in the United States, that a majority of people are better off than their parents were and they were better off than their parents.

This is what most people call the American dream. where you can go from being poor to being a millionaire.

Africa is the only place in the world where people are worse off than their parents.

The process of banking is beginning to show a change.

The Economist reports that people are investing more and more into Africa.

“Real GDP growth is expected to rise from 5.7% in 2006 to 6.1% this year, and 6.8% in 2008. This good performance is party driven by high commodity and oil prices….But it is also due to better economic management, more openness, and more stable politics. Such policies mean banks have to work harder to make a profit, but also help them grow. That is encouraging them to reach out to new customers – and so they should.”

A country cannot grow without good financial sector. This is why we see web sites like Kiva.org, where people directly loan to the businesses. The problem with this is that people then have a higher risk of losing their money and have to invest a lot more than in a bank account.

In the United States, our money is insured up to $100,000 and banks make money by taking your $500 dollar savings account, my $25 dollar savings account, and your dad $40,000 savings account and putting them all together to loan someone a house. They pay you interests rate and charge the person they are lending more.

There is still more to be done there are only 20% of African families that have an account….

From the Economist:

“Opening an account in Cameroon requires $700 – more than many of its people earn in a year. In Swaziland, a women needs the consent of her father, husband, or brother to open an account or take a loan, and 75% of adults do not have a verifiable address.”

So hopefully infrastructure grows faster than banking….

~PCCapitalist

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Published in: on December 7, 2007 at 8:34 pm  Leave a Comment  
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