By Observing the global trends in default rates over a period of 38 years, the International Finance Corporation (IFC) of the World Bank Group found that Africa ranks the highest making it a high credit risk.
In its report that spans from 1986 to 2023, the IFC says the period between 1986 to 2023 showed a global default rate of 4.1%, however, the period between 1986 to 2003 had the highest default rate reaching 11.5%, 10.3% respectively.
According to the IFC, there are three main industries that contribute to the default rate; investors need to approach with caution when investing or borrowing. The manufacturing, agribusiness and services industries have been notorious over the period recording the highest default rate reaching 5.6%, they are followed by infrastructure and natural resources at 3.1% and the finance markets at 2.0%.
Though Africa has been a hive of activity recently, attracting billions worth of investment and the International Monetary Fund (IMF) approving some loans in African economies, the continent has recorded the highest historical default rate of 6.7% driven primarily by investments in the earlier part of the observation period, while all other regions ranged between 3.2% and 4.5%.
The IFC reported that countries with the lowest income recorded the highest default rate at 8.6%. A further breakdown across World Bank regions reveals that Africa is leading in defaulting and is followed by East Asia and the Pacific with 4.5%, the Middle East and North Africa at 4.1%, South Asia at 3.6%, Latin American and the Caribbean at 3.4%, Europe and Central Asia at 3.2%.
Grouping countries based on income, the IFC report shows that low income countries have the highest default rate, followed by lower middle income countries at 4.7%, upper middle income at 3.4% while high income countries are at 3.0%.
