International credit to Africa

International credit to sub-Saharan Africa has expanded significantly since the Global Financial Crisis (GFC). While this credit remains small compared with other regions, it holds global significance due to the region’s fast-growing population. Africa’s working-age population has already surpassed those of North America and Western Europe, and it is projected to overtake China within the next decade. International credit has become increasingly important for financing investment as domestic systems mature. Although domestic financial systems have expanded and remain the primary source of credit, the ratio of domestic credit to GDP has been steadily falling. International credit, while providing essential funding, brings risks such as exchange rate volatility, over-borrowing, and the potential for domestic credit booms.

Drivers of international credit from the 1970s to the GFC

From the 1970s onwards, three key drivers shaped international credit to the region: commodity prices, global financial conditions, and official lending. In the 1970s, higher oil prices enabled Western commercial banks to recycle petrodollars into African loans. However, debt crises emerged in the early 1980s when the Federal Reserve hiked interest rates and commodity prices declined, reducing the capacity of African countries to service debts. Commercial bank lending retrenched, leading to an expansion in official sector lending. Multilateral credit grew from $6.6 billion in 1980 to $50.3 billion by 1995, and bilateral credit jumped from $14.5 billion to $75.5 billion. Debt relief programmes, such as the Heavily Indebted Poor Countries Initiative (1996) and the Multilateral Debt Relief Initiative (2005), eventually removed debt overhang and improved borrowing capacity.

A rapid expansion of credit to Africa post-GFC

International credit to Africa has grown rapidly since the GFC. The outstanding volume of cross-border loans more than doubled from approximately $100 billion at the end of 2009 to about $264 billion by the end of 2025. International bond issuance saw even more dramatic growth, increasing sevenfold from $27 billion to $192 billion over the same period. By 2023, international credit exceeded foreign direct investment to Africa. Between 2012 and 2019, the annual average growth rate of international credit to Africa was 7%, significantly faster than the 2% growth rate observed in other emerging market and developing economies (EMDEs).

Bank lenders, new and old

Chinese banks emerged as dominant providers of bank loans post-GFC. Between 2015 and 2020, their outstanding loans grew to represent one third of total cross-border loans to Africa. As of the end of 2025, Chinese banks lend to more than 40 African countries and serve as the primary lender to 24 of them. In 15 countries, they provide more than 50% of the total cross-border lending. By comparison, French banks, the second-largest lending system, are the primary lender to only nine countries. Despite this expansion, borrowing remains concentrated, with 24 borrowing countries receiving more than half of their cross-border loans from banks of a single nationality. London remains a key hub for routing credit, with US and South African banks particularly active in channelling funds through their London offices.

The Belt and Road Initiative and Chinese bank lending to Africa

The Belt and Road Initiative (BRI), formalised in 2013, has supplied substantial new bank lending, primarily focusing on energy and transportation projects. Until 2019, the region experienced a fast expansion of BRI lending, although the pace slowed after 2020 due to debt sustainability concerns and domestic real estate challenges within China. Most BRI loans were extended by two state-owned policy banks: the Export-Import Bank of China and the China Development Bank, which together accounted for 79% of all BRI loans. Despite an official strategy to promote the renminbi, 80–90% of BRI lending was denominated in US dollars, likely to match dollar-invoiced export revenues and foreign exchange reserves.

Original sin in Africa and domestic currency financing from international investors

African countries have historically struggled with “original sin” – the inability to borrow from abroad in their own currency. The US dollar remains the dominant currency for African borrowers, though the euro plays an important role in members of the West African Franc zone. Renminbi usage remains limited, accounting for only about 6% of cross-border loans. South Africa is a leading exception to this trend; while rand-denominated bonds account for only 4% of its international issues, international investors purchase large quantities of domestically issued bonds. These purchases account for approximately half of South Africa’s externally held bonds, rising to 80% when focusing specifically on government bonds.

New borrowers and new instruments

The post-GFC growth in credit was driven by new borrowers, with Nigeria, Angola, and Mauritius joining South Africa and Liberia as major borrowers. Substantial bond borrowing is a novel development, fostered by a search for yield among investors in a low interest rate environment and improved macroeconomic fundamentals. The share of loans directly to government borrowers has climbed from less than 10% in 2014 to 30% in 2025. Governments are now the dominant borrowers in international bonds, accounting for roughly two thirds of all outstanding international debt securities issued by African entities.

Conclusion

The rapid expansion of international credit provides necessary financing but introduces risks related to debt sustainability and lender concentration. High concentration in bank lenders means a contraction from a single creditor can significantly impact total financing for many borrowers. While international bonds broaden the investor base, these market investors can be flighty when global financing conditions turn. Prudent policies are essential to support debt sustainability as Africa’s role in the global population and economy continues to grow.