African Union (AU) will formally launch the Africa Credit Rating Agency (AfCRA) in June 2025, ending decades of its push for fairer credit ratings that more accurately reflect the continent’s economic realities.
International credit rating agencies are essential in determining how it costs countries to borrow money from foreign markets. But their structural biases and outdated risk assessments often result in lower-than-warranted ratings, making borrowing more expensive for African countries.
“It is time for Africa to use the right scale, one that reflects its true weight,” Kenyan President William Ruto said during a recent presidential breakfast dialogue on the establishment in Ethiopian capital Addis Ababa.
African nations rely heavily on global rating agencies. But critics say the agencies not only undervalue their economies, leading to higher borrowing costs, but also fail to accurately access African risk, and generally lack independence and objectivity. AfCRA, therefore, is supposed to close the gap by offering evaluations that are open and development-focused.
“Perception is not reality. Over the past five years, we have brought investors to Africa and mobilised well over $180bn in investment interest… It tells you the opportunities are limitless,” Adesina told an audience at Chatham House in London,” African Development Bank president Adesina Akinwumi, said at Chatham House, London, in June 2024.
Lower credit ratings mean African countries often have to pay higher borrowing costs, which restricts their capacity to finance social services, infrastructure, and economic growth.
What you need to know about AFCRA
The Africa Credit Rating Agency (AfCRA) is a continental initiative aimed at providing independent, credible, and African-owned credit ratings for sovereigns, sub-sovereign and corporates. Its primary objective is to enhance transparency, reduce reliance on the three international credit rating agencies, and address the specific needs of African countries, institutions and contexts.
Why was AFCRA established?
AfCRA was established to address concerns over perceived biases, inaccuracies, and high costs associated with international credit rating agencies when assessing African countries. It will provide an opportunity for the continent to have a credit rating system that reflects Africa’s unique socio-economic realities and fosters a fairer representation of its creditworthiness.
How does AfCRA differ from traditional credit rating agencies?
Unlike traditional credit rating agencies, AfCRA focuses exclusively on African economies, incorporating region-specific data and socio-economic indicators. It will operate with a mandate to strengthen African financial markets while promoting transparency, fairness and inclusivity. AfCRA will also emphasize development-driven credit assessment frameworks tailored to the continent’s diverse contexts.
What is the role of the African Peer Review Mechanism (APRM) in AfCRA?
The APRM will continue to play a crucial role as a supporter and strategic partner in AfCRA’s development and operations. It will provide governance insights, institutional frameworks, and technical expertise that inform the rating agency’s methodologies. The APRM will also ensure that AfCRA aligns with broader African Union objectives of sustainable development and integration.
How will AfCRA ensure credibility and independence?
AfCRA will be governed by a robust institutional framework with strict policies to prevent conflicts of interest. It will employ highly skilled professionals and adopt transparent methodologies that are in line with international best practices while reflecting African realities. Oversight mechanisms and partnerships with respected institutions will further bolster its credibility.
Will AfCRA compete with international credit rating agencies?
AfCRA’s objective is not to compete with or replace the three international credit rating agencies, but rather to complement them by providing an alternative perspective. It will focus on filling gaps in data and analysis, addressing regional nuances, and promoting African financial integration. This will allow for a diversified view of creditworthiness and fosters collaboration for mutual benefit.
How will AfCRA benefit African countries and businesses?
AfCRA will reduce the cost of credit ratings for African countries and businesses, increase their access to capital markets, and ensure a fairer representation of their creditworthiness. It will also provide a platform for promoting African projects and investments, driving economic growth and regional financial stability.
How will AfCRA address concerns about bias and transparency?
AfCRA will be committed to maintaining the highest standards of objectivity, impartiality, and transparency. Its methodology will integrate both quantitative and qualitative factors, ensuring an accurate and fair assessment of creditworthiness. AfCRA will also engage stakeholders, including governments, private sectors, and civil society, to build trust and accountability.
When will AFCRA begin its operations?
AfCRA is set to officially launch in June 2025 as part of the African Union’s broader agenda for financial integration and independence. The establishment process is currently underway, including stakeholder consultations and capacity-building initiatives.
How can stakeholders engage with AfCRA?
Stakeholders, including governments, financial institutions, and businesses, can engage with AfCRA through consultations, partnerships, and the submission of data for ratings. The agency will also be open to collaboration with global institutions to exchange expertise and foster best practices in credit assessment.
