Financial sector policy and poverty reduction in Sudan

Abstract EN

This paper examines the structure and performance of the financial sector in Sudan and its role in poverty alleviation.

The Sudanese financial sector is largely rudimentary and dominated by banks that are extremely small, generally undercapitalized and concentrated in big cities.

Despite the full adoption of Islamic methods of finance, these banks are not prepared to promote lending for poverty reduction, while state-owned development banks are a failure in terms of outreach and viability.

Financial sector reforms should be widened and deepened to foster both financial and real growth and a radical paradigm shift is imperative for developing a pro-poor financial structure involving both Islamic and conventional microfinance programs.

A dual banking system will enhance the process of financial development and access to credit through increased competition and broader alternatives for clients.

It is important to link microfinance programs to socio-economic institutions involved in poverty reduction such as Zakat and Awqaf funds in order to increase the efficiency of resource mobilization and use.