According to the MFW4A website, Regional Financial Integration plainly refers to efforts to broaden and deepen financial links within a region whether through a market driven or institutionalized processes. The issue of regional integration beyond the financial sector has been brewing ever since most countries in Africa started becoming politically independent. As most countries in Africa have small and inefficient financial markets, there has been an attraction to consolidating markets through RFI. The development of this strategy has been incredibly slow, has countries find it hard to give up their national ownership to infrastructures, find it hard to adhere to cross border legislations, and the high cost of which such integration would incur. An example of a progressive regional financial integration strategy in the continent is that of the CEMAC countries
There are indeed some benefits of Regional Financial Integration:
- Bringing together scarce savings, viable investment projects and financial infrastructure;
- Increasing the numbers and types of financial institutions and instruments;
- Increasing competition and innovation;
- Reducing inefficiencies in lending given a wider pool of bankable projects; and
- Expanding opportunities for risk diversification.
Below is an excerpt for the Making Finance Work for Africa report titled “Financing Africa: Through the Crisis and beyond”
True, regional integration has been on the agenda of African policy makers since the time when many countries achieved political independence. And, prima facie, there is an enormous potential for Africa in overcoming scale diseconomies by coming together. Not surprisingly, there have been numerous attempts at moving closer toward such cooperation. However, the results have been limited so far. One reason for the limited integration has been political; another is over ambition, as is obvious from the effort to establish a pan-African currency union; another still is weak implementation. For this reason, focusing on smaller, economically and institutionally more homogeneous sub-regions, such as East Africa, might be more promising than trying to integrate larger sub-regions containing countries at different levels of financial development and with different institutional and legal frameworks.
