Banking Efficiency and Financial Development in Sub-Saharan Africa (SSA)
AbstractThis study assesses the determinants of banking system efficiency in sub-Saharan Africa (SSA) and asks what, besides the degree of efficiency, explains the low level of financial development in the region. It uses stochastic frontier analysis to measure efficiency and a generalized method of moments system to explain financial development. SSA banks are found to be generally cost-efficient, with some differences across sub-regions. Among the determinants of efficiency, Return On Equity and non performing loans seem to have a negative impact, highlighting the problem of moral hazard faced by banks and the weakness of the judicial and legal environment in enforcing credit contracts. Financial development in SSA could be improved by better macroeconomic stabilization policy and a more competitive banking sector.
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Bibliographic InfoArticle provided by Africagrowth Institute in its journal African Finance Journal.
Volume (Year): 11 (2009)
Issue (Month): 2 ()
Cost-efficiency; Stochastic Frontier Analysis; Banking System; Financial Development; Sub-Saharan Africa;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O55 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Africa
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- Yibin Mu & Peter Phelps & Janet Gale Stotsky, 2013. "Bond Markets in Africa," IMF Working Papers 13/12, International Monetary Fund.
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