Author:
BizCLIR TeamDate:
June 2009Abstract:
Access to finance allows well-functioning economies to effectively allocate resources to their most efficient use. Individuals need finance to fund housing, education, and healthcare to raise their standard of living and improve their productivity. Farmers need credit for infrastructure investments and the purchase of seeds, tools, and fertilizer. Manufacturers and service firms need finance to expand operations and investment in enhanced productivity. Entrepreneurs need it to fund new innovative ventures that can spur competition. Financial firms act as the mechanism to allocate resources to their most effective use.However, when the business enabling environment does not provide for the transparent sharing of credit information, the ability to efficiently secure interest in collateral, and the ability to enforce loan contracts in case of default, financial firms are incapable of achieving the optimal resource allocation for society. All of these are serious problems across East Africa.
