Relationship between financial inclusion, banking stability and economic growth: a dynamic panel approach

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Richard Boachie ◽  
Godfred Aawaar ◽  
Daniel Domeher
Keyword(s):  
Economic Growth ◽  
Banking Sector ◽  
Financial Inclusion ◽  
Sub Saharan Africa ◽  
Bank Capital ◽  
African Countries ◽  
Content Type ◽  
Regulatory Frameworks ◽  
Banking Stability ◽  
Sub Saharan

PurposeThe purpose of this paper is to analyse the relationship between financial inclusion, banking stability and economic growth in sub-Saharan African countries given the interconnectedness between them. Globally, financial inclusion has gained recognition as a critical channel for promoting economic growth by bringing a large proportion of the unbanked population into the formal financial system. This cannot be achieved exclusive of the banking sector.Design/methodology/approachThis paper focussed on 18 countries in sub-Saharan Africa. Data on financial inclusion and the economy were obtained from the World Bank, and bank soundness indicators data were also obtained from International Monetary Fund covering the 11-year period from 2008 through 2018. Panel system generalised method of moments is employed for the regression analysis because it has the capability to produce unbiased and consistent results even if there is endogeneity in the model.FindingsThe results show that economic growth drives banking stability and not vice versa; confirming a unidirectional causality from gross domestic product to banking stability. So, this study finds support for the demand-following hypothesis. The paper further observed that financial inclusion positively and significantly influences the stability of banks and economic growth. The study established that bank capital regulation negatively influences banking stability in sub-Saharan African countries.Research limitations/implicationsThis study does not capture the unique country-specific relationship.Practical implicationsThe policy implication is that policymakers in sub-Saharan African countries should focus on growth-enhancing policies that improve the level of financial inclusion. The central banks in sub-Saharan African countries should take advantage of the positive effect of financial inclusion to develop regulatory frameworks and policies that make it attractive for banks to continue to expand their operations to the unbanked.Originality/valueThis is, as far as the authors know, the explanation of the interconnection of financial inclusion, banking stability and economic growth in sub-Saharan Africa.

Shadow economy in Africa: how relevant is financial inclusion?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Folorunsho M. Ajide
Keyword(s):  
Shadow Economy ◽  
Financial Inclusion ◽  
Sub Saharan Africa ◽  
African Countries ◽  
Content Type ◽  
Development Indicators ◽  
Panel Data Estimation ◽  
Sub Saharan ◽  
Data Estimation ◽  
Toda And Yamamoto

Purpose This study aims to investigate the possible relationship between financial inclusion and shadow economy in selected African countries. Design/methodology/approach The study uses panel data estimation technique and Toda and Yamamoto causality approach. The data of selected African counties over a period of 2005–2015 are sourced from World Bank Development Indicators, International Monetary Fund International Financial statistics database and International Country Risk Guide. Findings The results show that financial inclusion reduces the size of shadow economy. The causality results show that there is a unidirectional causality moving from financial inclusion to shadow economy. The results demonstrate that a country with lower level of corruption and higher level of growth can benefit more in reducing the size of shadow economy through financial inclusion. Originality/value This study provides the first evidence of the link between financial inclusion and shadow economy from the Sub-Saharan Africa perspective. The study suggests that financial inclusion may be useful in affecting the size of shadow economy in Africa.

scholarly journals Financial development and economic growth: literature survey and empirical evidence from sub-Saharan African countries

2011 ◽  
Vol 12 (1) ◽  
pp. 11-27 ◽  
Author(s):  
Songul Kakilli Acaravci ◽  
Ilhan Ozturk ◽  
Ali Acaravci
Keyword(s):  
Economic Growth ◽  
Financial Development ◽  
Banking Sector ◽  
Sub Saharan Africa ◽  
African Countries ◽  
Real Gdp ◽  
Long Run ◽  
Domestic Credit ◽  
Real Gdp Per Capita ◽  
Sub Saharan

In this paper we review the literature on the finance-growth nexus and investigate the causality between financial development and economic growth in Sub-Saharan Africa for the period 1975-2005. Using panel co-integration and panel GMM estimation for causality, the results of the panel co-integration analysis provide evidence of no long-run relationship between financial development and economic growth. The empirical findings in the paper show a bi-directional causal relationship between the growth of real GDP per capita and the domestic credit provided by the banking sector for the panels of 24 Sub-Saharan African countries. The findings imply that African countries can accelerate their economic growth by improving their financial systems and vice versa.

Does regional currency integration ameliorate global macroeconomic shocks in sub-Saharan Africa? The case of the 2008-2009 global financial crisis

2014 ◽  
Vol 41 (5) ◽  
pp. 737-750 ◽  
Author(s):  
Gregory N. Price ◽  
Juliet U. Elu
Keyword(s):  
Economic Growth ◽  
Financial Crisis ◽  
Global Financial Crisis ◽  
Sub Saharan Africa ◽  
Parameter Estimates ◽  
African Countries ◽  
Macroeconomic Shocks ◽  
Content Type ◽  
Sub Saharan ◽  
The Impact

Purpose – The purpose of this paper is to consider whether regional currency integration in sub-Saharan Africa ameliorates global macroeconomic shocks by considering the impact of the 2008-2009 global financial crisis on economic growth. This suggests that Central Africa Franc Zone (CFAZ) eurocurrency union membership amplifies the effects of global business cycles in sub-Saharan Africa. Design/methodology/approach – The authors estimate the parameters of a quantity theory model of economic growth within a Generalized Estimating Equation (GEE) Framework. Findings – Parameter estimates from GEE specifications reveal that the contraction in credit during the financial crisis of 2008-2009 had larger adverse growth effects on sub-Saharan African countries who were members of the CFAZ eurocurrency union. The authors also find that sub-Saharan African countries who were members of the CFAZ eurocurrency union were more likely to experience a contraction in credit. Originality/value – As far as the authors can discern, no existing empirical growth models use a GEE framework to estimate parameters of interest. The GEE parameter estimates are distribution-free, robust with respect to unknown forms of heteroskedasticity, and control for a wide variety of error structures that can induce bias in panel data parameter estimates.

Financial inclusion and migrant remittances in Sub-Saharan Africa: a panel VAR approach

2020 ◽  
Vol 47 (7) ◽  
pp. 809-829
Author(s):  
Ebenezer Bugri Anarfo ◽  
Godfred Amewu ◽  
Gloria Clarissa Dzeha
Keyword(s):  
Economic Growth ◽  
Peer Review ◽  
Financial Sector ◽  
Financial Inclusion ◽  
Sub Saharan Africa ◽  
Content Type ◽  
Financial Sector Development ◽  
Sub Saharan ◽  
Migrant Remittances ◽  
Practical Implications

PurposeThis study examines the causal and dynamic link between financial inclusion and migrant remittances in sub-Saharan Africa.Design/methodology/approachThe study employed a panel vector autoregressive (VAR) framework to examine the dynamic relationship between financial inclusion and migrant remittances in sub-Saharan Africa.FindingsThe findings indicate that there is a reverse causality between financial inclusion and migrant remittances in sub-Saharan Africa.Practical implicationsThe practical implications of these findings are that central governments and economic policymakers in sub-Saharan African countries should formulate and implement policies aimed at fostering financial inclusion if they are to attract more migrant remittances to promote economic growth and financial sector development. This suggests that these two variables are complementary and not contradictory. The results also suggest that central banks and other financial institutions can leverage the positive effect of financial inclusion of financial sector development to enhance the development of the financial sector instead of pursuing financial sector development as a policy objective. This means policies aimed at promoting financial inclusion will not impede or sacrifice migrant remittances, economic growth and financial sector development.Originality/valueThis paper is the first to construct a financial inclusion index to examine the link between financial inclusion and migrant remittances from the sub-Saharan Africa perspectivePeer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-10-2019-0612/

Managing African Urbanization in the Context of Environmental Change

2014 ◽  
Vol 2 (2) ◽  
Author(s):  
Shuaib Lwasa
Keyword(s):  
Climate Change ◽  
Economic Growth ◽  
Social Services ◽  
Urban Areas ◽  
Urban Governance ◽  
Sub Saharan Africa ◽  
African Countries ◽  
Sub Saharan ◽  
Urbanization Rate ◽  
Development And Management

Africa’s urbanization rate has increased steadily over the past three decades and is reported to be faster than in any other region in the world . It is estimated that by 2030, over half of the African population will be living in urban areas . But the nature of Africa’s urbanization and subsequent form of cities is yet to be critically analyzed in the context of city authorities’ readiness to address the challenges . Evidence is also suggesting that urbanization in African countries is increasingly associated with the high economic growth that has been observed in the last two decades . Both underlying and proximate drivers are responsible for the urbanization, and these include population dynamics, economic growth, legislative designation, increasing densities in rural centers, as well as the growth of mega cities such as Lagos, Cairo and Kinshasa, that are extending to form urban corridors . With the opportunities of urbanization in Sub–Saharan Africa, there are also challenges in the development and management of these cities . Those challenges include provision of social services, sustainable economic development, housing development, urban governance, spatial development guidance and environmental management, climate change adaptation, mitigation and disaster risk reduction . The challenge involves dealing with the development and infrastructure deficit, in addition to required adaption to and mitigation of climate change . This paper examines the current state of urban management in Africa .

scholarly journals Financial Inclusion, Income Inequality and Sustainable Economic Growth in Sub-Saharan African Countries

2021 ◽  
Vol 13 (4) ◽  
pp. 1780
Author(s):  
Chima M. Menyelim ◽  
Abiola A. Babajide ◽  
Alexander E. Omankhanlen ◽  
Benjamin I. Ehikioya
Keyword(s):  
Economic Growth ◽  
Income Inequality ◽  
Financial Services ◽  
Sub Saharan Africa ◽  
Kuznets Curve ◽  
African Countries ◽  
Financial Access ◽  
Sub Saharan ◽  
Sustainable Economic Growth ◽  
The Impact

This study evaluates the relevance of inclusive financial access in moderating the effect of income inequality on economic growth in 48 countries in Sub-Saharan Africa (SSA) for the period 1995 to 2017. The findings using the Generalised Method of Moments (sys-GMM) technique show that inclusive financial access contributes to reducing inequality in the short run, contrary to the Kuznets curve. The result reveals a negative effect of financial access on the relationship between income inequality and economic growth. There is a positive net effect of inclusive financial access in moderating the impact of income inequality on economic growth. Given the need to achieve the Sustainable Development Targets in the sub-region, policymakers and other stakeholders of the economy must design policies and programmes that would enhance access to financial services as an essential mechanism to reduce income disparity and enhance sustainable economic growth.

scholarly journals Foreign Direct Investment - Growth Linkage in Sub-Saharan Africa: Is Governance a Mediating Factor?

2019 ◽  
Vol 6 (2) ◽  
pp. 111-129
Author(s):  
Fisayo Fagbemi ◽  
Kehinde Mary Bello
Keyword(s):  
Economic Growth ◽  
Fixed Effects ◽  
Political Stability ◽  
Business Environment ◽  
Mediating Effect ◽  
Sub Saharan Africa ◽  
Policy Framework ◽  
Investment Efficiency ◽  
African Countries ◽  
Sub Saharan

In sub – Saharan Africa, weak institutions and the rising concern for improved business environment offer considerable leverage for enhancing the effectiveness of institutional framework, capital inflows, and public investment efficiency. These have put SSA in the global spotlight in recent times. Hence, the study examines the mediating effect of governance on FDI – growth nexus in 35 SSA countries between 2002 and 2017 using panel data techniques (Pooled OLS, Fixed Effects, and Panel-Corrected Standard Error’ (PCSE) estimation) and the Dynamic One – Step Difference and System GMM. Results indicate that control of corruption, political stability and regulatory quality, including governance composite index, have a positive and significant effect on economic growth, suggesting that institutions have a salutary impact on SSA economies. The findings further show that FDI inflows adversely influence growth owing to insufficient absorptive capacity that could enhance FDI effectiveness in the region. More importantly, the pervasiveness of poor governance in SSA is identified as a critical case that undermines the development of the nexus between FDI and economic growth. Thus, the study suggests that FDI – growth linkage would be enhanced by promoting a strong institutional environment that offers a good mechanism for attaining the actual FDI spillover potential through a policy framework that points the path towards cost-effective measures in SSA. Also, there should be core investment policies across African countries that would induce the private sector in consolidating government efforts and resources aimed at improving international competitiveness by diversifying the region’s economies away from a protracted commodity – based.

A critical analysis of water PPP failures in sub-Saharan Africa

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Salman Tariq ◽  
Xueqing Zhang
Keyword(s):  
Construction Management ◽  
Design Methodology ◽  
Sub Saharan Africa ◽  
African Countries ◽  
Content Type ◽  
Rigorous Approach ◽  
First Case ◽  
Management Perspective ◽  
Sub Saharan

PurposeTop-down pressure from donors, public sector inefficiencies and fund deficits have steered the introduction of public–private partnerships (PPPs) in sub-Saharan Africa. However, PPP activities in the water sector have been quite insignificant compared to other infrastructure sectors in this region. In addition, a number of water PPPs have encountered great difficulties and subsequent failures. This study aims at unveiling the underlying reasons behind failures.Design/methodology/approachThis study has classified the failure types of water PPPs and reviewed the development of water PPPs in sub-Saharan Africa to identify failed ones. Eight failed case studies are completed through the rigorous approach of event sequence mapping.FindingsNine root causes of water PPP failure are identified through a thorough examination of these failed water PPP cases and the interrelationships between these failure causes are established. The failure causes are further generalized through literature focusing on water PPP failures in developing countries and problematic issues that hinder the implementation of successful water PPPs across different Sub-Saharan African countries. Recommendations are provided for future improvements in carrying out water PPPs in Sub-Saharan Africa by learning past lessons and drawing experiences.Originality/valueThis is the first case study on water PPP failures in Sub-Saharan Africa from a construction management perspective. This study will help governments and the private sector in developing stronger future water PPPs.

scholarly journals The state of business sustainability reporting in sub-Saharan Africa: an agenda for policy and practice

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Carol A. Tilt ◽  
Wei Qian ◽  
Sanjaya Kuruppu ◽  
Dinithi Dissanayake
Keyword(s):  
Sustainability Reporting ◽  
New Institutional Economics ◽  
The State ◽  
Data Availability ◽  
Policy Implications ◽  
Sub Saharan Africa ◽  
African Countries ◽  
Content Type ◽  
Reporting Practices ◽  
Sub Saharan

Purpose Developing countries experience their own social, political and environmental issues, but surprisingly limited papers have examined sustainability reporting in these regions, notably in sub-Saharan Africa. To fill this gap and understand the state of sustainability reporting in sub-Saharan Africa, this paper aims to investigate the current state of reporting, identifies the major motivations and barriers for reporting and suggests an agenda of future issues that need to be considered by firms, policymakers and academics. Design/methodology/approach This paper includes analysis of reporting practices in 48 sub-Saharan African countries using the lens of New Institutional Economics. It comprises three phases of data collection and analysis: presentation of overall reporting data collected and provided by Global Reporting Initiative (GRI). analysis of stand-alone sustainability reports using qualitative data analysis and interviews with key report producers. Findings The analysis identifies key issues that companies in selected sub-Saharan African countries are grappling within their contexts. There are significant barriers to reporting but institutional mechanisms, such as voluntary reporting frameworks, provide an important bridge between embedding informal norms and changes to regulatory requirements. These are important for the development of better governance and accountability mechanisms. Research limitations/implications Findings have important implications for policymakers and institutions such as GRI in terms of regulation, outreach and localised training. More broadly, global bodies such as GRI and IIRC in a developing country context may require more local knowledge and support. Limitations include limited data availability, particularly for interviews, which means that these results are preliminary and provide a basis for further work. Practical implications The findings of this paper contribute to the knowledge of sustainability reporting in this region, and provide some policy implications for firms, governments and regulators. Originality/value This paper is one of only a handful looking at the emerging phenomenon of sustainability reporting in sub-Saharan African countries.

Economic freedom, competition and bank stability in Sub-Saharan Africa

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Emmanuel Sarpong-Kumankoma ◽  
Joshua Yindenaba Abor ◽  
Anthony Q. Q. Aboagye ◽  
Mohammed Amidu
Keyword(s):  
Economic Freedom ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Sub Saharan Africa ◽  
Bank Stability ◽  
Content Type ◽  
Show Evidence ◽  
Negative Effect ◽  
Sub Saharan ◽  
The Stability

PurposeThis study aims to analyze the potential implications of economic freedom and competition for bank stability.Design/methodology/approachUsing system generalized method of moments and data from 139 banks across 11 Sub-Saharan African (SSA) countries during the period 2006–2012, this study considers whether the degree of economic freedom affects the relationship between competition and bank stability.FindingsThe results show evidence of the competition-fragility hypothesis in SSA banking, but suggests that beyond a setting threshold, increases in market power may also be damaging to bank stability. Financial freedom has a negative effect on bank stability, suggesting that banks operating in environments with greater financial freedom generally tend to be less stable or more risky. The authors also find evidence of a conditional effect of economic freedom on the competition–stability relationship, implying that bank failure is more likely to occur in countries with greater economic freedom, but with low competition in the banking sector.Practical implicationsThe results suggests to policy makers that a moderate level of competition and economic freedom may be the appropriate policy to ensure the stability of banks.Originality/valueThe study provides insight on the competition–bank stability relationship, by providing new empirical evidence on the effect of economic freedom, which has not been previously considered.

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