Africa has launched its own credit rating agency, the Africa Credit Ratings Agency (AfCRA), in a move aimed at providing an alternative assessment of the creditworthiness of African countries, businesses and institutions.
Backed by the African Union after nearly a decade of discussions, AfCRA is expected to challenge concerns that international credit rating agencies do not always fully reflect the economic realities of African countries.
The agency is headquartered in Mauritius, which was selected partly because of its established financial services industry.
AfCRA to Offer Alternative to Global Rating Agencies
AfCRA will provide an alternative to the three major global credit rating agencies — Fitch, Moody’s and S&P — which have faced criticism over their assessments of African economies.
The African Peer Review Mechanism, the institution behind the new agency, said 23 African countries currently have no credit rating from the traditional international agencies.
Analysts have also argued that conventional rating models can overlook important aspects of African economies, including large informal sectors that are not fully captured in official economic data.
Nigeria’s President Bola Tinubu previously welcomed the creation of AfCRA, saying Africa was seeking fair ratings based on the fundamentals and reforms of its economies rather than favourable assessments.
Credit Ratings Affect Borrowing Costs
Credit ratings have a direct impact on how much countries pay when they borrow from international markets because investors typically demand higher interest rates from borrowers perceived to carry greater risk.
According to estimates cited by the Organisation for Economic Co-operation and Development, Africa paid an average of about $9 in interest for every $100 borrowed on international markets in 2024.
That compared with approximately $4.70 for emerging markets in Asia and $6.50 in Latin America.
Hannah Wanjie Ryder, chief executive of consultancy Development Reimagined, said AfCRA should not be viewed solely as a response to dissatisfaction with existing rating agencies.
She said the agency could provide assessments that take a closer look at economic conditions and realities that may not be adequately captured by conventional models.
Independence Will Be Key Test
The credibility of AfCRA will depend largely on whether investors consider its assessments independent and accurate.
Its founders have said the agency will operate without government interference, but analysts have identified its treatment of African governments as an important early test.
Jacob Oreki, a management consultant at Kenya’s Strathmore University Foundation, said African borrowers have historically paid a high-risk premium and argued that standard rating models could overlook factors such as informal economic activity, domestic savings and economic reforms.
He cautioned that investors would need to see evidence of independence and accuracy before relying on AfCRA’s ratings.
The launch therefore marks the beginning of a new phase for Africa’s credit-rating landscape, with the agency expected to demonstrate that its assessments can earn market confidence based on their methodology and credibility.
