Finance for Sustainable Development in Africa

Evolution, Impact and Policy Implications

Nicholas Mbaya Odhiambo, Erasmus Larbi Owusu, Simplice Anutechia Asongu, Nicholas Mbaya Odhiambo, Erasmus Larbi Owusu, Simplice Anutechia Asongu

• Publisher: Routledge
• Year: 2023
• Print ISBN: 9781032103778
• eBook ISBN: 9781000893243
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

Although a number of selected African countries have made efforts to implement various financial sector reforms, many countries have not fully implemented the requisite reforms required for sustainable development. Instead, they have focused mainly on bank-based financial reforms, thereby neglecting market-based financial reforms. This study provides a one-stop shop for understanding the history and evolution of the financial sector in Africa with a special focus on the sub-Saharan region where the financial system in many countries is still at a relatively nascent stage. The analysis is extensive and robust, and starts from financial repression to financial liberalisation (both internal and external), and its role in sustainable development and poverty alleviation.

The book covers a range of important research issues pertaining to financial development in selectede African countries, including interest rate and exchange rate reforms, the dynamics of bank-based and market-based financial development; the role of the informal financial sector in sustainable development; the finance-growth nexus; bank-based versus market-based financial sectors in Africa; financial development and information and communication technology; and financial development and gender equality, among other topics. The book also considers the relationship between the COVID-19 global pandemic and financial development, and concludes by presenting a forecast of the future trends of financial and sustainable development on the African continent in general and sub-Saharfan Africa in particular. The chapters are authored by prominent scholars and researchers in the field of finance and banking, applied econometrics and development economics, with a deep understanding and knowledge of financial development and the local situations in African countries.

This book provides crucial reference material for academics, researchers, policymakers and students of all levels and is a must-read for anyone wishing to understand the nature of finance and sustainable development in Africa in relation to the rest of the world. It covers African countries, but with more emphasis on the sub-Saharan African region where the financial systems in many of the countries are still relatively underdeveloped.

Table of contents

• Cover
• Half Title
• Series Page
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• List of Tables
• List of Contributors
• 1 Introduction
• 1.1 Significance of the Book
• 1.2 Structure and Outline of the Book
• PART I
• Historical Evolution of Finance in Africa
• 2 The Evolution of Financial Sector Reforms in African Countries
• 2.1 Introduction
• 2.2 Financial Sector Policies and Development before Liberalization in Africa
• 2.3 Financial Liberalization and Financial Crisis
• 2.4 Financial Restructuring after Crisis
• 2.5 Conclusion
• References
• 3 Financial Reforms and Financial Development in Africa: Evidence from Selected SSA Countries
• 3.1 Introduction
• 3.2 Financial Reforms in Sub-Saharan Africa
• 3.3 Trends and Patterns of Financial Development in Sub-Saharan Africa
• 3.3.1 Interest Rate Spreads in Sub-Saharan Africa
• 3.3.2 Financial Deepening in Sub-Saharan Africa
• 3.3.3 Banking Concentration in Sub-Saharan Africa
• 3.3.4 Stock Market Development in Sub-Saharan Africa
• 3.3.5 Indices of Financial Development in Sub-Saharan Africa
• 3.4 Conclusion
• References
• 4 Interest Rate Reforms in African Countries
• 4.1 Introduction
• 4.2 Characteristics of the Financial System in African Countries
• 4.3 Interest Rate Policies in African Countries in the Last Two Decades
• 4.4 Sequencing of Interest Rate Reform Policies in African Countries
• 4.5 Conclusion
• References
• 5 Financial Determinants of Informal Financial Development in African Countries
• 5.1 Introduction
• 5.2 Review of the Literature
• 5.3 Data and Methodology
• 5.3.1 Data
• 5.3.2 Methodology
• 5.4 Empirical Results
• 5.5 Conclusion and Future Research Direction
• References
• 6 Finance-Growth Nexus: A Review of Afrocentric Literature
• 6.1 Introduction
• 6.2 Finance–Growth Nexus Debate
• 6.3 Empirical Literature Review
• 6.3.1 The Supply-Leading Response
• 6.3.2 The Demand-Following Response
• 6.3.3 Bi-directional/Feedback Response
• 6.4 Conclusion
• References
• PART II
• Impact of Finance on Sustainable Economic Growth in Africa
• 7 Financial Development and Economic Growth in African Countries
• 7.1 Introduction
• 7.2 Literature Survey
• 7.2.1 Financial Landscape and Economic Growth Dynamics in Africa
• 7.2.2 Empirical Literature Survey
• 7.3 Methodology
• 7.3.1 Heterogeneous Granger Causality
• 7.3.2 Data
• 7.4 Empirical Analysis
• 7.4.1 Cross-Sectional Dependence Test
• 7.4.2 First- and Second-Generation Panel Unit Root Tests
• 7.4.3 Panel Cointegration Test
• 7.4.4 Heterogeneous Panel Causality Analysis
• 7.5 Conclusion
• References
• 8 Bank-Based Financial Development and Economic Growth in African Countries
• 8.1 Introduction
• 8.2 Literature Review
• 8.3 Methodology
• 8.3.1 GMM Specification
• 8.3.2 Identification and Exclusion Restrictions
• 8.3.3 Data
• 8.4 Empirical Analysis and Discussion
• 8.5 Conclusion
• References
• 9 Stock Market Development and Economic Growth in African Countries
• 9.1 Introduction
• 9.2 Literature Review
• 9.3 Variables, Methodology, and Empirical Analysis
• 9.3.1 Variable Description and Expectations
• 9.3.2 Methodology and Empirical Model
• 9.4 Results and Implications
• 9.4.1 Summary Statistics and Correlation Analysis
• 9.4.2 Main Results for Full Sample and Income Groups
• 9.5 Conclusion
• References
• 10 Financial Intermediaries, Stock Market Development and Economic Growth in African Countries
• 10.1 Introduction
• 10.2 Financial Sector Reforms and Development in SSA
• 10.3 Financial Intermediation, Stock Market and Economic Growth: A Review of Literature
• 10.4 Estimation Techniques and Empirical Analysis
• 10.4.1 Empirical Model
• 10.4.2 Empirical Analysis
• 10.4.2.1 Cross-Sectional Dependence Test
• 10.5 Conclusion
• References
• 11 Microfinance Performance and Economic Development in African Countries
• 11.1 Introduction
• 11.2 Stylized Facts on MFI Performance and Economic Development in Africa
• 11.2.1 MFI Sustainability and Economic Development
• 11.2.2 MFI Social Performance and Economic Development
• 11.2.3 MFI Financial/Profitability Indicators and Economic Development
• 11.3 Methodology
• 11.4 Discussion of Findings
• 11.4.1 Full Sample
• 11.4.2 Sub-Sample (High and Low Income) Analysis
• 11.5 Conclusion
• References
• PART III
• Impact of Finance on Poverty Alleviation in Africa
• 12 Information and Communications Technology (ICT) Diffusion and Financial Development Nexus in African Countries
• 12.1 Introduction
• 12.2 Literature Review
• 12.3 Methodology and Data
• 12.3.1 Empirical Specification
• 12.3.2 Data
• 12.4 Empirical Results and Discussion
• 12.4.1 Principal Component Analysis, Descriptive Statistics, and Correlation Matrix Results
• 12.4.2 Panel Causality Result Analysis
• 12.4.3 Panel VAR in GMM Result Analysis
• 12.4.4 Variance Decomposition and Impulse Response Analysis
• 12.6 Conclusion and Policy Recommendations
• References
• 13 Financial Development and Remittance in African Countries
• 13.1 Introduction
• 13.2 Remittance in Flows and Financial Development: A Review of the Literature
• 13.3 Estimation Techniques and Empirical Analysis
• 13.3.1 Empirical Model
• 13.3.2 Cross-Sectional Dependence Test
• 13.3.3 Stationarity Test
• 13.3.4 Cointegration
• 13.3.5 Dynamic OLS (DOLS) and Fully Modified OLS (FMOLS)
• 13.4 Conclusion
• References
• 14 Financial Inclusion and Gender Inequality in African Countries
• 14.1 Introduction
• 14.2 Financial Sector Development in Sub-Saharan Africa
• 14.3 Data and Descriptives
• 14.3.1 Gender-Disaggregated Patterns of Financial Inclusion
• 14.3.2 Empirical Estimation
• 14.3.3 Empirical Results
• 14.4 Discussion and Conclusion
• References
• 15 Financial Development and SMEs in African Countries
• 15.1 Introduction
• 15.2 Literature Review
• 15.3 Overview of SME Financing in Africa
• 15.4 Case Studies from Five African Countries
• 15.4.1 Ghana
• 15.4.2 Nigeria
• 15.4.3 Morocco
• 15.4.4 South Africa
• 15.4.5 Tanzania
• 15.5 Conclusion
• References
• 16 COVID-19 Global Pandemic, Financial Development and Financial Inclusion in African Countries
• 16.1 Introduction
• 16.2 The Impact of COVID-19 on the Financial Sector
• 16.2.1 Increase in Digital Payments
• 16.2.2 COVID-19 and Emerging Risks in the Financial Sector
• 16.2.3 Financial Services Priorities in Post–Covid-19
• 16.3 Implications of the COVID-19 Pandemic to the Financial Sector
• 16.3.1 Implications for Asset, Real Estate and Private Equity Management
• 16.3.2 Implication for Banking and Capital Markets
• 16.4 Concluding Implications and Future Research Directions
• Acknowledgement
• References
• 17 Financial Institutions, Poverty and Severity of Poverty in African Countries
• 17.1 Introduction
• 17.2 Theoretical Underpinnings and Literature Review
• 17.2.1 Theoretical Underpinnings
• 17.2.2 Literature Review
• 17.3 Data and Methodology
• 17.3.1 Data
• 17.4 Empirical Results
• 17.5 Concluding Implications and Future Research Directions
• References
• Index