Mobilizing Domestic Savings for Sustainable Growth in ECCAS: Turning Financial Potential into Economic Transformation

By Salim Ahmed Vessah and Larissa Ntoubia Ngapmen

Executive Summary

The Economic Community of Central African States (ECCAS) faces a structural paradox: despite abundant natural resources and strong demographic potential, domestic savings remain insufficiently mobilized to support sustainable growth. The region’s savings rate averages 24-25% of GDP, compared to over 30–35% in East Asia, reflecting a persistent financing gap. Addressing this gap is increasingly urgent. Reliance on external financing, particularly foreign direct investment (FDI) and development aid has proven volatile, procyclical, and concentrated in extractive sectors, limiting its impact on structural transformation. In a context of tightening global financial conditions and rising debt vulnerabilities, external capital can no longer be considered a reliable engine of growth. Domestic savings offer a more stable and strategic alternative but remain constrained by financial exclusion, informality, and weak intermediation. This brief analyzes these constraints and proposes actionable reforms to mobilize domestic savings as a driver of investment, resilience, and long-term growth in ECCAS.

Key Messages

• ECCAS has savings, but not enough productive investment. The challenge is mobilizing and allocating savings more effectively.
• Resource dependence makes savings volatile. Commodity price fluctuations undermine long-term investment and growth.
• Informality limits savings mobilization. A large share of savings remains outside the formal financial system.
• Domestic savings are key to sustainable growth. They can finance investment, create jobs, and reduce dependence on external funding.
• Reforms are urgently needed. Financial inclusion, stronger institutions, and economic diversification are essential to turn savings into development.

Introduction

In the international context marked by geopolitical fragmentation, tightening financial conditions, and recurrent health and climate shocks, development financing constraints have intensified, particularly in Africa. The African Development Bank (AfDB) estimates that the continent faces an annual financing gap exceeding USD 400 billion to achieve the Sustainable Development Goals (SDGs) by 2030. While external resources such as foreign direct investment (FDI), aid, and remittances, have traditionally played a key role, their growing volatility and procyclicality increasingly limit their reliability as a foundation for long-term development. In this context, mobilizing domestic savings is not simply desirable, but necessary as demonstrated by East Asian countries. Unlike external capital flows, domestic savings provide a more stable and countercyclical source of financing, allowing countries to sustain investment during periods of global uncertainty. Moreover, reliance on external financing often reinforces structural dependencies, particularly in resource-rich economies where FDI is concentrated in extractive sectors with limited spillovers to the broader economy. As a result, growth remains weakly diversified and vulnerable to commodity price shocks.

For ECCAS countries, this challenge is particularly acute where domestic savings rates fall below 24-25% of GDP in 2023. Their economic structures are characterized by high informality, shallow financial systems, and dependence on volatile natural resource revenues. All that limit both the mobilization and effective allocation of domestic savings. Even when savings exist, they are often held outside formal financial systems, reducing their capacity to finance productive investment and structural transformation. Therefore, strengthening domestic savings is a strategic imperative. It enables greater financial autonomy, supports investment in infrastructure and industry, and enhances resilience to external shocks.

This policy brief addresses a central question: how can ECCAS countries mobilize and effectively channel domestic savings to support sustainable and inclusive growth? By analyzing trends, identifying constraints, and exploring transmission mechanisms, the brief provides a roadmap for policymakers seeking to harness domestic financial resources for development.

Domestic Savings Trends and Constraints in ECCAS

• Trend

Domestic savings trends in ECCAS reflect broader patterns observed across Sub-Saharan Africa but are shaped by strong region-specific structural characteristics. While the region is often perceived as having low savings capacity, recent data suggest a more nuanced reality. In 2023, domestic savings in ECCAS countries averaged approximately 24-25% of GDP, based on World Bank country-level data. This level appears significantly higher than the Sub-Saharan African average of around 13%, but remains below high-performing regions such as East Asia, where savings rates often exceed 30–35% of GDP. However, this relatively high regional average masks strong heterogeneity and is largely driven by resource-rich economies. However, this aggregate figure masks significant disparities and, more importantly, differences in the nature and quality of savings.

A key feature of ECCAS savings is their strong dependence on natural resource rents. Resource-rich economies such as Gabon (54.0% of GDP) and the Republic of Congo (42.8%) exhibit exceptionally high savings rates, largely driven by oil revenues. Similarly, Chad (30%) and the Democratic Republic of Congo (31.4%) display relatively strong savings performance. In contrast, structurally fragile and low-income economies such as the Central African Republic (-5.7%), Rwanda (9.2%), and Cameroon (15.1%) record significantly lower savings rates. Countries such as Angola (23.9%), Equatorial Guinea (21.1%), and Burundi (18.3%) occupy an intermediate position.

This distinction highlights a critical issue: relatively high savings in ECCAS do not necessarily translate into productive investment. Resource-based savings are often volatile, externally driven, and weakly intermediated through domestic financial systems. As a result, they tend to finance consumption, capital outflows, or enclave sectors, rather than supporting broad-based structural transformation. In parallel, a large share of household savings remains informal and disconnected from financial institutions, further limiting its contribution to investment. Thus, the core challenge in ECCAS is not only the level of savings, but their composition, stability, and allocation efficiency.

• Constraints

A key characteristic of savings in ECCAS is their pro-cyclical and politically mediated nature. In resource-dependent economies, savings typically rise during commodity price booms due to increased export revenues and fiscal surpluses. However, these gains are rarely sustained. During downturns, falling commodity prices result in decreased public revenues, fiscal deficits, and significant drops in savings. This volatility hampers long-term investment planning and contrasts with countries like Botswana, which have successfully stabilized resource revenues through sovereign wealth funds and counter-cyclical fiscal frameworks. At the household level, savings remain structurally low, despite high aggregate figures in some countries. Limited and unstable incomes, widespread poverty, and vulnerability to economic shocks severely restrict households’ saving capacity. Additionally, financial inclusion is weak, with a large portion of the Central African population unbanked and lacking access to formal financial services, especially in rural areas.

Institutional and political constraints also play a crucial role in hindering the effective mobilization and transformation of domestic savings. Weak governance frameworks, a lack of transparency in public financial management and the absence of credible long-term fiscal rules diminish the efficiency of managing public savings, particularly those from natural resources. In several ECCAS countries, resource revenues are often allocated based on short-term political priorities and weak accountability mechanisms, undermining their potential for productive investment. Moreover, political economy dynamics, such as rent-seeking behavior, elite capture and fragmented decision-making distort financial resource allocation. Instead of being invested in infrastructure, industrial development, or human capital, a portion of available savings may be diverted to non-productive uses or politically motivated expenditures, impeding the conversion of savings into sustainable growth.

Another significant feature is the persistence of informal savings mechanisms. Rotating savings and credit associations (ROSCAs), tontines, and community-based systems continue to play a vital role in mobilizing savings. While these mechanisms provide essential financial support and risk-sharing, their prevalence reflects not a failure of savers, but an institutional mismatch between informal practices and formal financial systems. Formal financial institutions often fail to offer products that match the flexibility, trust, and social collateral embedded in tontine systems. As a result, a large share of savings remains outside formal intermediation, limiting its contribution to large-scale investment and capital accumulation. Digital financial services could help bridge this gap by connecting informal savings practices to formal financial systems. However, their adoption in Central Africa remains limited compared to East and West Africa, where digital finance has significantly enhanced financial inclusion and savings mobilization. This lag reflects not only infrastructural constraints but also regulatory and institutional barriers, including weak digital governance frameworks and limited coordination among financial authorities.

Domestic Savings and Sustainable Growth: Transmission Channel

Domestic savings play a crucial role in supporting sustainable economic growth through multiple transmission channels. First, savings provide the financial resources necessary for investment. Higher savings levels enable governments and private firms to finance infrastructure, industrial development, and technological innovation. This accumulation of capital is a key driver of productivity and economic growth. Second, domestic savings enhance financial sector development. Increased deposits in the banking system expand the availability of credit, allowing businesses to invest and grow. This process strengthens financial intermediation and contributes to economic diversification.

Third, savings reduce dependence on external financing. Countries with higher domestic savings are less vulnerable to fluctuations in foreign capital flows and exchange rate volatility. This enhances macroeconomic stability and resilience to external shocks. Fourth, savings contribute to human capital development. When households are able to save, they are more likely to invest in education, health, and other long-term assets, improving overall welfare and productivity. However, the effectiveness of these channels depends on the quality of institutions and the efficiency of financial systems. In contexts where financial intermediation is weak or where corruption diverts resources, savings may not translate into productive investment.

International experiences provide valuable lessons. East Asian economies successfully leveraged high savings rates to finance rapid industrialization, supported by strong institutions and effective policies. Similarly, countries like Rwanda have improved savings mobilization through financial inclusion and policy reforms. For ECCAS, the challenge is not only to increase savings but also to ensure that they are efficiently allocated to productive uses.

Policy Recommendations

Closing the savings–investment gap in ECCAS requires not only increasing savings levels, but fundamentally transforming how savings are mobilized, governed, and allocated across the economy.

Short-term (1-2 years)

• Expand financial inclusion: Enable mobile money interoperability and introduce low-cost savings accounts.
• Reduce access barriers: Simplify account opening and deploy agent banking in rural areas.
• Incentivize savings: Launch targeted programs (e.g., matched savings for youth and women).

Medium-term (3-5 years)

• Develop savings instruments: Introduce retail government bonds and tax incentives for long-term savings.
• Reform pensions: Extend coverage to informal workers through flexible contribution schemes.
• Stabilize revenues: Establish sovereign wealth funds and fiscal rules in resource-rich countries.

Long-term (5-10 years)

• Diversify economies: Invest in manufacturing and agro-processing to generate stable savings.
• Strengthen governance: Improve transparency and accountability in public financial management.
• Promote regional integration: Harmonize financial systems within ECCAS to mobilize cross-border savings.

Conclusion

Domestic savings represent a critical but underutilized resource for economic transformation in ECCAS. While structural constraints remain significant, the region has the potential to enhance savings mobilization through targeted reforms. By improving financial inclusion, strengthening institutions, and promoting macroeconomic stability, ECCAS countries can transform domestic savings into a powerful engine of sustainable growth. The experience of other regions demonstrates that this transformation is achievable. With the right policies and political commitment, domestic savings can play a central role in reducing dependence on external financing and supporting long-term development.