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Abstract:
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The financial sector in Burundi has had a very limited effect on the country’s development. High
political and economic risks have prevented banks from engaging in long-term lending, constraining
long-term investment. Moreover, the industrial organisation of the financial sector is not conducive for
development lending because the sector is used more as a source of rents than development finance.
As a result, the financial sector has been unable to address the needs of the core drivers of growth in
Burundi, namely, agriculture and industry. Therefore, increasing the financial sector’s participation in
Burundi’s economic development will require an improvement in political and macro-economic
stability, as well as an increase of financial institutions’ long-term re-sources. Most particularly,
development banking should play its role of fostering the development of agriculture and the rural
economy. In addition, more competition in the financial sector should be encouraged with the aim of
diversifying financial services and pushing the sector’s boundaries beyond the traditional urban market
to embrace the rural economy where most economic activities take place. |