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The African Financial Development Gap

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Author Info

  • Franklin Allen
  • Elena Carletti
  • Robert Cull
  • Jun "QJ" Qian
  • Lemma Senbet

Abstract

Economic growth in Africa has long been disappointing. We document that the financial sectors of most sub-Saharan African countries remain significantly underdeveloped by the standards of other developing countries. We examine the factors that are associated with financial development in Africa and compare them with those in other developing countries. Population density appears to be considerably more important for banking sector development in Africa than elsewhere. Given the high costs of developing viable banking sectors outside metropolitan areas, technology advances, such as mobile banking, could be a promising way to facilitate African financial development. Similarly to other developing countries, natural resources endowment is associated with a lower level of financial development in Africa, but macro policies do not appear to be an important determinant.

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Bibliographic Info

Paper provided by European University Institute in its series Economics Working Papers with number ECO2010/24.

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Date of creation: 2010
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Handle: RePEc:eui:euiwps:eco2010/24

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Keywords: Africa; finance and growth; banks; institutions; population density;

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References

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  1. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
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Cited by:
  1. Gohou, Gaston & Soumaré, Issouf, 2012. "Does Foreign Direct Investment Reduce Poverty in Africa and are There Regional Differences?," World Development, Elsevier, vol. 40(1), pages 75-95.
  2. Soumaré, Issouf & TCHANA TCHANA, Fulbert, 2011. "Causality between FDI and Financial Market Development: Evidence from Emerging Markets," MPRA Paper 31328, University Library of Munich, Germany.
  3. Thorsten Beck & Samuel Munzele Maimbo, 2013. "Financial Sector Development in Africa : Opportunities and Challenges," World Bank Publications, The World Bank, number 11881, October.

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