In sub-Saharan Africa, however, growth in local-currency bond markets has been stymied by the absence of a large and diversified domestic investor base, undeveloped secondary markets, and the lack of liquidity of many instruments.5 In most cases, moreover, the issuance of local-currency bonds has been limited to the sovereign.
Where local bond financing consists mostly of domestic banks, the buying of government securities will tend to crowd out finance for a large number of private businesses and/or for much-needed infrastructure projects.