2012年-世界发展银行全球_Scaling-up_Regional_Financial_Integration_in_the_East_African_Community_62页_1mb

Summary of "Scaling-up Regional Financial Integration in the East African Community"

Core Content

This report updates the 2007 World Bank study Financial Sector Integration in Two Regions of Sub-Saharan Africa (FSITR) by focusing on the current state of financial integration in the East African Community (EAC) and the challenges of integrating Burundi and Rwanda into the regional financial sector. It provides a detailed analysis of the progress made, the existing obstacles, and the strategic recommendations for further development.

Main Objectives

• To document the current state of financial integration in the EAC.
• To elaborate on the challenges specific to the integration of Burundi and Rwanda, which joined the EAC after FSITR.
• To provide actionable inputs for the proposed EAC Regional Financial Markets Integration Project.

Key Findings

Financial Integration in the EAC

• Commercial Banks: East African banks have been proactive in adopting a regional business model, with many operating across EAC countries. Kenya-based banks are leading the integration process, with several operating branches in Tanzania, Uganda, and Rwanda.
• Insurance Companies: Kenyan insurance firms have a stronger regional presence compared to those from Tanzania and Uganda. The estimated number of Kenyan insurance branches in the EAC region is around 30.
• Capital Markets: The integration of EAC stock exchanges is planned for 2012, with a common automated trading system (ATS) being developed. Currently, Kenya's NSE dominates cross-listed shares, while Uganda and Tanzania are expected to follow Kenya's model.
• Cross-Border Investment: Cross-listing of shares and increased private capital flows have already begun, but the majority of cross-border participation is dominated by institutional investors, with Kenyan investors contributing the largest share.

Operational Integration

• Most banks surveyed have achieved partial integration in areas such as ICT, risk management, and customer service.
• A majority of banks favor a single licensing regime to promote deeper integration, though EAC rules do not yet allow cross-border branching.
• Regulatory Challenges: The lack of a common tax regime, resistance from local regulators, and differing capital movement policies are major obstacles to full integration.
• Supervision: Only Tanzanian banks have experienced supervision by a central bank in another EAC country, and it has been limited to routine inspections.

Going Forward

• Harmonization of Legal and Regulatory Frameworks: A common regulatory and supervisory framework is needed to facilitate integration.
• Mutual Recognition: Regulators should align with international standards such as Basel and IOSCO.
• Single Licensing Regime: This would reduce transaction costs and barriers to entry, and should be extended to other financial institutions.
• Regional Financial Infrastructure: Payments systems, central securities depositories (CSDs), and trading platforms need to be aligned with the regional system.
• Cross-Border Supervision: Enhanced cooperation between financial supervisors is necessary to monitor risks and prevent contagion.
• Data Gathering: Improved data on cross-border financial activities is crucial for informed policy decisions.

Integration of Burundi and Rwanda

Overview

• Diversity of Membership: The inclusion of Burundi and Rwanda has diversified the EAC membership.
• Legal Systems: The three founding members (Kenya, Tanzania, Uganda) have English common law systems, while Rwanda and Burundi follow civil law due to their colonial history.

Burundi

• Low Financial Development: Burundi has the least developed financial sector in the EAC, with limited banking and insurance services.
• EAC Membership Resignation: The financial sector in Burundi shows little enthusiasm for EAC membership due to fears of increased competition from more developed EAC countries.
• Banking System: Seven commercial banks, two finance houses, and a state development bank dominate the sector, with minimal insurance coverage.
• Challenges: Burundi lacks a coherent integration strategy and needs to address capital shortfalls and regulatory harmonization.

Rwanda

• Strong Commitment to EAC: Rwanda's financial sector is more integrated and shows a stronger commitment to regional integration.
• Financial Sector Development: Rwanda has a more developed financial sector, with a broader range of services and a growing capital market.
• Regulatory Openness: Rwandan regulators are open to regional integration, including harmonizing laws and regulations with other EAC countries.
• Cross-Border Investment: Rwanda has a more favorable environment for foreign banks, with a straightforward licensing process and support for free movement of labor.

Recommendations

• Develop an EAC Integration Strategy for Burundi: This should include an assessment of financing needs, capital shortfalls, and regulatory alignment.
• Accelerate Regulatory Convergence: Burundi should adopt Rwanda's regulatory models for financial services, including banking, payments, and capital markets.
• Financing for Supervisory Development: Flexible technical assistance credits should be established to support capacity building in both Burundi and Rwanda.
• Support for Burundi's Payments System: Burundi could benefit from adopting Rwanda's payments system, leveraging the costs already incurred by Rwanda in system procurement.

Conclusion

The report highlights the progress made in financial integration within the EAC, particularly in the banking and insurance sectors, and emphasizes the need for regulatory harmonization, infrastructure development, and enhanced cross-border supervision to achieve deeper integration. Burundi and Rwanda, being newer members, require targeted support to align with the EAC's financial integration goals.