Africa’s new credit agency: why it’s about a lot more than just ratings

The new Africa Credit Rating Agency (AfCRA) has already generated an important debate. Some analysts have portrayed it as a rival to the three established global rating agencies – Fitch, Moody’s and S&P Global. Others have questioned whether Africa needs another rating agency at all.

But, based on my expertise researching African financial markets and the role of credit rating agencies in particular, I would argue that this framing misses the bigger picture.

The Africa Credit Rating Agency (AfCRA) should not be viewed as a challenger attempting to compete head-on with the century old rating agencies. It is rather a new lever for expanding and deepening Africa’s capital markets, broadening credit intelligence and helping redirect capital towards productive investment in infrastructure, energy and manufacturing to create jobs, generate income and grow economic capacity.

The agency’s success should therefore be measured by whether it helps African countries make progress in these areas. In this sense, the Africa Credit Rating Agency is not simply another rating agency. It is a pioneer of a stronger, deeper and more efficient African financing ecosystem.

Africa has a remarkably large pool of domestic capital. These are savings held and controlled by African pension funds, sovereign wealth funds, banks, insurers and other investors.

But most of this capital remains concentrated in short-term 90-day treasury bills and bonds. It cannot generate nor sustain economic growth that way.

Meanwhile, productive sectors such as infrastructure, manufacturing and energy don’t get enough financing.

The problem is that the credit ratings industry in Africa remains very small. Yet its role is vital for two reasons. First, its decisions influence how investors allocate capital. The credit ratings industry provides investors with clearer information about the risks of lending, making them more confident about providing long-term financing to businesses and governments.

Secondly, it sets the price at which capital is deployed. This is because the industry judges the capacity of a borrower to repay in full and on time. A low assessment raises the cost. A higher one lowers it.

The number of entities that have a rating from any of the rating agencies is currently less than 5% of the total estimated capital in Africa.

Africa has an estimated US$4 trillion domestic capital base – the money already available that can be invested in businesses. Yet less than US$500 billion worth of these financial instruments and economic entities are subject to formal credit ratings. Across sovereigns, corporates, financial institutions, municipalities, government-related entities and other issuers, the rated entities and instruments remain tiny relative to the potential market.

Compare this with mature financial markets. At the end of 2025, Africa had fewer than 4,000 ratings assigned by both international and domestic rating agencies. That year there were 823,000 in the European Union and over 2 million credit ratings in the US.

There are nine rating agencies operating in Africa. The US has 10 and the European Union 29 active credit rating agencies.

The aim

The anticipated role of the Africa Credit Rating Agency is fourfold.

Firstly, to provide ratings.

Secondly, to help expand Africa’s ratings industry and bring greater credit intelligence to more than US$3.5 trillion in capital currently invested without formal ratings. Much of this capital remains concentrated in treasury bills, money market funds and fixed-term deposits. These are highly liquid, short term and risk-averse instruments. Investors prefer these short-term investments that are easy to access and convert into cash.

Thirdly, the agency provides an opportunity to expand Africa’s financial markets by creating a larger and deeper information ecosystem. For investors, the value of a rating lies not simply in the rating category, but in the assumptions, evidence, rationale and context behind it. Credible ratings provide greater accuracy and precision in understanding risk.

The value of the Africa Credit Rating Agency will therefore be measured by how effectively its analysis helps investors distinguish genuine credit weaknesses from risks that may be amplified by limited information, inadequate data or insufficient contextual understanding.

This matters because one of Africa’s biggest financing challenge lies in mobilising the capital the continent already has. Pension funds, insurers, banks, sovereign wealth funds, asset managers that control substantial pool of African capital need reliable credit information to assess a wider range of investments beyond traditional short-term and highly liquid instruments.

Fourth, the broader objective is to break the cycle in which perceptions of risk currently keep capital on the sidelines, push it offshore or concentrate it in short-term assets while productive African businesses struggle to secure long-term financing.

The new agency helps narrow this information gap. Africa needs investors to become more informed and analytical about risk, while borrowers need a clearer understanding of what drives their creditworthiness and how it can be strengthened.

Market-building exercise

The ratings industry is evolving. The international rating agencies are recognising the value of contextual risk analysis. This requires having more locally based analysts who understand the economic, political and institutional realities of the markets they assess.

They have begun positioning themselves accordingly.

S&P Global’s acquisition of Nigeria-based Agusto & Co, which operates across several African markets, and Moody’s earlier acquisitions of Middle East Rating & Investors Services, West Africa Rating Agency (WARA) and GCR reflect the growing recognition of the importance of local expertise and context in assessing African risk.

Way forward

The Africa Credit Rating Agency deserves the opportunity to prove itself. Its success will depend on the institution itself, as well as on investors, policymakers, financial institutions and other rating agencies working together to build a more balanced financing architecture.

Criticism and scrutiny are necessary. But they should not become grounds to dismiss the new institution prematurely. The Africa Credit Rating Agency should be given the chance and space to demonstrate the value it can contribute.

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