Africa Pays 9% to Borrow. Asia Pays 4.7%: The Borrowing Gap Costing Africa $75 Billion a Year and Blocking Its Rise
Source: tcodo
Africa Pays 9% to Borrow. Asia Pays 4.7%: The Borrowing Gap Costing Africa $75 Billion a Year and Blocking Its Rise
Source: tcodo
26 Comments
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5% interest is not what is causing africa to fail to excel in the world. civil unrest, exploited people, and war are the cause.
Cause and effect is backwards. If Africa was stable and thriving it would be able to borrow cheaply.
If you want investors to take a risk and give you money that you might never pay back after a civil war, you have to pay extra
Is the % difference due to the risk/reward?
I’d assume Africa has borrowed a lot in the past and their ability to repay is not as reliable as Asia…no?
I understand the sentiment but this is suggesting it is deliberate/nefarious. Instead it is a market rate based on the fact loans to Africa run a higher risk of not getting repaid, thus the higher interest rate.
Its about risk.
Two friends ask to borrow your car.
Friend A had a collision when they were younger but has been taking driving lessons since and can likely afford to get it repaired.
Friend B can barely drive, gets into accidents often, and is in and out of work so might not be able to pay to get it repaired.
Who are you more likely to lend your car to?
Banks are like this with everyone. The higher risk, the more interest. This makes it sound like banks are specifically punishing Africa when they’re just being banks lol.
Not having 2% home loan is blocking my rise in the real estate market
Argentina has similar rates due to history of mismanagement. Same issue in Africa. Asia worked very hard to create good investment environment. Even poorer countries like India significantly improved their credit ratings and borrowing costs. Industrialization is a tough road, there are a lot of basics African countries are just not doing. But that doesn’t mean western credit agencies are completely fair, that is true.
“Africa” is a bit if a pointless thing to say here, there is a huge difference between African countries and the stability and risk of borrowing between them. The same for Asia, but if youre averaging them out, it’s just not a genuine or reasonable thing to do if you want to make a legitimate and meaningful point.
Not the best time for this article!
Borrowing is based on risk, what’s riskier loaning money to a middle class Japanese man or a broke African one?
But the current average credit card interest rate is 25.22% which is blocking my rise. Seems like Africa should look at it from my perspective .
This makes so much sense when you think about it. The interest rate gap basically guarantees the gap in development stays the same. Africa pays more to borrow, so builds less, so looks riskier, so pays more to borrow. Its a cycle that’s almost impossible to break without outside intervention and yet the outside world is the one charging the premium in the first place.
Africans eat and steal this money. Communism and Islam also contribute to economic stagnation.
They should try not being immensely corrupt
It’s the premium to pay if you’re at risk of civil war etc.
Banks do not give a shit on the race or color of their borrowers skin. Money does not know color. It is rule of law and willingness and ability to repay the loans that define the risk. Africa is badly lacking in these areas, therefore they have to pay the price.
Mainly because when Africa borrows, it goes into the pockets of our politicians (and generations of Africans keep paying these odious debt); whereas when Asia borrows, it goes into the development of their nations.
Because many African countries are where investments go to die. Half of the 50 or so countries there are either in an active conflict or have authoritarian/corrupt leader that would weaponise the money into bribes or kickbacks to maintain power. Many of these authoritarian dictatorships also have a bad habit of nationalising anything of value in their country the nanosecond times get tough (looking at you Zimbabwe), run said asset into the ground and then complain that output is dogsh1t.
Even the more stable countries spend a good portion of their time threatening to destroy each others infrastructure, look at Egypt and Ethiopia…. Investors probably wouldnt be best pleased if their shiny new dam is turned to rubble before it has a chance to pay anything back.
TLDR – I wouldnt invest in a product with a 10-20% risk of default short term, and neither should our nations/national banks.
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Har
It’s risk based. No one cares if it’s Africa, Asia or bumfuck-nowhere. As long as the risks are the same – the loans will have the same price. When big money is at play no one cares about your Twitter/reddit racism warriors. Money is money. And risk is risk.
Suggesting that lenders, who literally just care about making money, have some sort of nefarious plot to hold down Africa through higher borrowing rates is stupid as fuck. Its the most standard version of risk premia.
Shall we publish about Venezuelan bonds holding down the people next?
if risk is higher rate is higher
My neighbor the millionaire pays 3% on his mortgage. I pay 7%. The gap is blocking my rise to millionaire status.