African leaders convene on establishment of homegrown solution, the Africa Credit Rating Agency
As the mainland continues to move towards economic integration and resilience, the establishment of the African Credit Rating Agency (AFCRA) represents a critical step in advocating Africa’s position on global financial governance. In this regard, state and government leaders will establish a presidential dialogue for the African credit rating agency on February 14, 2025. Financial experts and development partners aim to consider the operations of specialized credit rating agencies on the continent.
The event will be held on the brink of the 37th Australian General Summit, which was 0800 hours at the African Union headquarters, underscoring Africa’s commitment to strengthening financial sovereignty on the continent and addressing long-term challenges associated with three international credit rating agencies . The African Credit Rating Agency was established to provide fair, transparent and development-focused credit ratings to reflect the reality and potential of the African economy.
Key objectives of the conference include:
- Reaffirm political will and collective commitment to the establishment of AFCRA.
- Discuss the progress of ongoing technical work.
- The role of AFCRA in supporting financial stability and growth in Africa is outlined.
- Explore ways to develop partnerships with partners and international financial institutions.
10 things you need to know about credit rating agencies in Africa.
- What is the African Credit Rating Agency (AFCRA)?
The African Credit Rating Agency (AFCRA) is a continental initiative designed to provide independent, credible and African-owned credit ratings for sovereignty, sub-sovereignty and businesses. Its main goal is to increase transparency, reduce reliance on three international credit rating agencies, and meet specific needs of African countries, institutions and environments.
- Why build AFCRA?
AFCRA was established to address concerns about bias, inaccuracy and high costs associated with international credit rating agencies when evaluating African countries. It will provide the continent with a credit rating system to reflect Africa’s unique socio-economic realities and promote its reputable equitable representation.
- How is AFCRA different from traditional credit rating agencies?
Unlike traditional credit rating agencies, AFCRA focuses on African economies, which contain region-specific data and socio-economic indicators. It will have a mission to strengthen African financial markets while promoting transparency, equity and inclusion. The AFCRA will also emphasize a development-driven credit assessment framework that is targeted at various environments on the continent.
- What is the role of the African Peer Review Mechanism (APRM) in AFCRA?
APRM will continue to serve as a vital role as a supporter and strategic partner in the development and operation of AFCRA. It will provide governance insights, institutional frameworks and technical expertise to inform rating agencies of their approach. APRM will also ensure that AFCRA complies with the broader African Union goals of sustainable development and integration.
- How will AFCRA ensure credibility and independence?
The AFCRA will be managed by a strong institutional framework and strictly adopt policies to prevent conflicts of interest. It will adopt highly skilled professionals and adopt a transparent approach that aligns with international best practices while reflecting African reality. Oversight mechanisms and partnerships with respected institutions will further enhance their credibility.
- Will AFCRA compete with international credit rating agencies?
AFCRA’s goal is not to compete with or replace three international credit rating agencies, but to supplement them by providing another perspective. It will focus on filling gaps in data and analytics, addressing regional nuances, and promoting financial integration in Africa. This will diversify credit integrity and facilitate collaboration for mutual benefit.
- How will AFCRA benefit African countries and businesses?
AFCRA will reduce the credit rating costs of African countries and businesses, increase their access to capital markets, and ensure a fairer representation of their credibility. It will also provide a platform for promoting African projects and investments, promoting economic growth and regional financial stability.
- How will AFCRA address concerns about bias and transparency?
AFCRA will strive to maintain the highest level of objectivity, impartiality and transparency. Its approach will integrate quantitative and qualitative factors to ensure an accurate and fair assessment of credit. The AFCRA will also attract stakeholders including government, the private sector and civil society to build trust and accountability.
- When will AFCRA start operating?
The AFCRA will be officially launched in June 2025 as part of the African Union’s broad agenda for financial integration and independence. The establishment process is underway, including stakeholder consultation and capacity-building programs.
- How do stakeholders interact with AFCRA?
Stakeholders, including governments, financial institutions and businesses, can interact with AFCRA through consultation, partnerships, and data submitted for ratings. The agency will also work with organizations around the world to exchange expertise and develop best practices for credit assessments.
Distributed by Apo Group on behalf of the African Union (AU).
