The African Financial Development and Financial Inclusion Gaps

Abstract

This paper investigates the African financial development and financial inclusion gaps relative to other peer developing countries. Using a set of variables related to financial development and inclusion, we first estimate the gaps between African countries and other developing countries with similar degrees of economic development. Then, we explore the determinants of financial development and inclusion and find that population density appears to be considerably more important for financial development and inclusion in Africa than elsewhere. We then show evidence that a recent innovation in financial services, mobile banking, has helped to overcome infrastructural problems and improve financial access. JEL CODES: G2; O1; R2.

Does financial VAT affect the size of the financial sector?

“…Model 3 is the definitive model for the variable fdepth, finding that, once again, gdppc2 determines financial development, as in the previous models and with the same sign, but also the coefficient of industry appears to be significant, with the same sign as expected, according to Rajan and Zingales (2003) and Allen et al (2014).…”

“…This paper shows that the countries with the worst investment protection, measured by the nature of the law and the quality of the state of law, have smaller capital markets. Many authors also study the function of institutions in financial development: Levine et al (2000), Beck et al (2003), Rajan and Zingales (2003), Law and Demetriades (2005), Chinn and Ito (2006), Djankov et al (2007), Law and Azman-Saini (2008), Huang (2010a), Luca and Spatafora (2012) and Allen et al (2014). Other authors focus on the influence of political instability, corruption and other political determinants of financial development, such as Barth et al (2004), Dinc (2005), Detragiache et al (2005), Micco et al (2007) and Roe and Siegel (2011).…”

The Effects of Economic and Financial Development on Financial Inclusion in Africa

“…In Africa, Allen et al (2014) found that population density is more important for financial development and financial inclusion than elsewhere. Moreover, they show evidence that mobile banking improves financial access.…”

Commodity Prices and Bank Lending

“…7. A possible concern is that some countries are not "price-takers": for those countries, if economic growth collapses for a different reason, the recession could affect Understanding the role of banks in the transmission of international commodity prices could provide novel insights, given that the banking sector in developing countries differs along a number of features compared to more advanced economies-bank size and efficiency, funding and capital structure, and foreign ownership (Allen et al 2014;Beck, Demirguc-Kunt, and Levine 2010;Claessens and Van Horen 2014). Indeed, the lack of evidence of any specific role for foreign banks in amplifying or dampening the transmission of shocks is unique to the experience of low-income countries, and can be explained by the prevalence of regional banks, the strong reliance on retail funding also of foreign banks, and the ineffectiveness of internal capital market funding.…”