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PreprintCited by 44Monetary Policy and Economic ImpactEconomic Growth and DevelopmentBanking stability, regulation, efficiency

Financial Markets and Economic Development in Africa

Open access
Ndikumana, Leonce·2003·SSRN Electronic Journal
DOI 10.2139/ssrn.333321
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Abstract

This paper reviews the theory and evidence on the links between financial development and economic activity in the context of African countries. The paper presents stylized facts on the trends and patterns of financial development in Africa since the 1970s, discusses the size and performance of African stock markets, and summarizes the findings from existing empirical studies on the effects of financial development on economic growth in African economies. The evidence discussed in the paper indicates that financial systems are still relatively underdeveloped in the majority of African countries. Aggregate (traditional) measures of financial intermediation show that credit supply has either stagnated or declined in most of sub-Saharan African countries in the past two decades. However, recent structural and institutional indicators of financial market development show that a number of countries have made significant progress in promoting an environment that is conducive to financial intermediation. Much progress is still needed, however, especially to strengthen the institutional framework for banking regulation, promote monetary policy autonomy, establish government and central bank credibility, develop banking supervision, which will create an environment that is conducive to investment and saving. Progress in those areas will not only promote financial market development but it will also foster economic growth.

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  • The development of the financial sector contributes to a better allocation of financial resources through channelling savings towards productive investment projects without substantial risk of asymmetric information.

    “As Levine (2005), Ndikumana (2003) believes that the development of the financial sector contributes to a better allocation of financial resources through the channelling of savings towards productive investment projects without substantial risk of asymmetric information.”

    From Financial development and human capital thresholds for the infrastructure development-industrialization nexus in Africa (2023) · cites this paper as Ndikumana (2003)

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Authors
Ndikumana, L.
Venue
SSRN Electronic Journal
Publisher
Elsevier BV
Published
2003
ISSN
1556-5068 (ISSN-L)
DOI
10.2139/ssrn.333321
OpenAlex
W1547090667
Cited by
43
References
66
Citations by year
2025: 1 · 2024: 1 · 2023: 2 · 2021: 4 · 2020: 2 · 2019: 4 · 2017: 2 · 2015: 3 · 2014: 3 · 2013: 2 · 2012: 2
Type
posted content
Language
en
Open access
Locations
SSRN Electronic Journal (acceptedVersion)
Topics
  • Social Sciences › Economics, Econometrics and Finance › General Economics, Econometrics and Finance › Monetary Policy and Economic Impact
  • Physical Sciences › Computer Science › Information Systems › Economic Growth and Development
  • Social Sciences › Economics, Econometrics and Finance › Finance › Banking stability, regulation, efficiency
Keywords
financial development, economic growth, Africa, sub-Saharan Africa, financial intermediation, credit supply, stock market, banking regulation, monetary policy independence, central bank credibility, banking supervision, institutional quality, savings and investment

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