Africa’s banking sector is under-leveraged and fragmented, limiting its ability to finance large-scale infrastructure and industrial projects, despite holding an estimated $2.5 trillion in total assets, the Africa Finance Corporation (AFC) has warned in its latest State of Africa’s Infrastructure (SAI) Report.
Released ahead of major continental economic talks, the 2025 SAI report paints a sobering picture of Africa’s financial landscape: awash in capital, yet structurally constrained. The report underscores that the continent’s commercial banks, although theoretically well-positioned, have remained largely ineffective at channeling long-term financing into transformative sectors, primarily due to scale inefficiencies and systemic fragmentation.
The report indicated that Africa remains constrained by the limited depth of its financial markets, warning that the region’s banks are still focused on short-term, low-risk lending—leaving a gaping hole in the financing of long-term development projects.
Fragmented Institutions, Underused Capital
While the spotlight often falls on foreign aid or multilateral loans, the report shifts attention inward, arguing that Africa already possesses the financial firepower to catalyze its development if domestic capital is properly mobilized. According to AFC’s estimates, the continent commands over $4 trillion in domestic capital pools—including $2.5 trillion in banking assets and $1.6 trillion in non-bank assets such as pensions, insurance, public development banks, sovereign wealth funds, and central bank reserves.
The report emphasizes the vast but idle potential locked within these institutions. For instance, Africa’s public development banks and sovereign wealth funds collectively manage some $400 billion, yet remain underutilized due to fragmented mandates, inadequate capitalization, and weak alignment with long-term national development strategies.
“Collectively managing some $400 billion, these institutions are often underutilized due to fragmented mandates and weak alignment with national development plans,” the report states.
“New AFC research confirms that Africa already holds the resources to accelerate this journey,” said AFC President and CEO Samaila Zubairu. “But unless financial institutions are repositioned with clear mandates and structured investment pathways, this capital will continue to sit on the sidelines.”
A Shift Toward Domestic Financial Engineering
The AFC’s report recognizes some early progress, pointing to the expanding role of mission-driven institutions such as Caisses de Dépôts in the CFA franc zone. These bodies, which combine savings collection with targeted investment in strategic sectors, are cited as examples of financial models that could be replicated and scaled across the continent.
The report also estimates a conservative $1.1 trillion in long-term institutional capital available from African pension funds, insurance companies, sovereign wealth funds, and public development banks.
However, most of these funds are invested in low-risk, short-term instruments—primarily foreign securities and government bonds—rather than productive sectors such as transport, energy, or manufacturing.
This mismatch, the report argues, stems from an absence of viable long-term investment vehicles within African markets. AFC recommends the creation of pooled funds, regional investment platforms, and the greater use of risk-mitigation tools to attract institutional investors into infrastructure and industry.
Call for Reforms and Financial Innovation
The SAI report calls for bold policy reforms and targeted financial engineering to overcome the structural inertia. It suggests aligning mandates of public financial institutions with national development plans, increasing cross-border financial cooperation, and expanding blended finance mechanisms to reduce perceived risk.
The report’s release comes as African governments grapple with rising debt burdens, sluggish infrastructure rollout, and growing pressure to meet climate and industrialization targets. Many of these governments have turned to the private sector to fill financing gaps—but without systemic reform, analysts warn the continent’s underperforming financial architecture may remain a bottleneck.
Since its founding, the AFC has sought to address these challenges directly, investing over $15 billion in 36 African countries and expanding its membership to 45 nations. The institution is now doubling down on efforts to catalyze domestic financing, arguing that Africa’s future will depend less on foreign aid than on its own ability to mobilize the capital it already controls.
“New AFC Research confirms that Africa already holds the resources to accelerate this journey. We estimate the continent’s domestic capital pools at over $4 trillion, including more than $1.6 trillion across the non-bank sector: $455 billion in pensions, $320 billion in insurance, $250 billion in public development banks, $150 billion in sovereign wealth funds, and $473 billion in foreign reserves, including $38 billion in gold holdings,” Zubairu stated.
