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Bank Efficiency and Openness in Africa: Do Income Levels Matter?


  • Simplice Anutechia Asongu


The business of this study is to investigate the role of openness in bank efficiency with respect to income levels. From a panel of 29 low and middle income African countries with data spanning from 1987 to 2008, we provide evidence that, openness (trade and financial) breeds less bank efficiency in low income countries. As for middle income countries, while financial openness has the same effect, results for trade openness are not significant. These findings justify the absence of a banking comparative advantage and consequently, the issue of over-liquidity resulting from low funding of credits by deposits. For policy implications, openness will increase the economic cost of banks in sampled countries. However, trade openness will be more detrimental than financial openness. More so, banks in middle income countries play a greater role in financing activities resulting from trade openness than those in low income countries.

Suggested Citation

  • Simplice Anutechia Asongu, 2012. "Bank Efficiency and Openness in Africa: Do Income Levels Matter?," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 4(2), pages 115-122, December.
  • Handle: RePEc:rfb:journl:v:04:y:2012:i:3:p:115-122

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    References listed on IDEAS

    1. Venus Khim-Sen Liew, 2004. "Which Lag Length Selection Criteria Should We Employ?," Economics Bulletin, AccessEcon, vol. 3(33), pages 1-9.
    2. Sandrine Kablan, 2010. "Banking Efficiency and Financial Development in Sub-Saharan Africa," IMF Working Papers 10/136, International Monetary Fund.
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    12. Asongu Simplice, 2011. "Globalization, Financial Development and Regional Economic Dynamics: asymmetric panel evidence from Africa," Working Papers 11/008, African Governance and Development Institute..
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    Cited by:

    1. Asongu Simplice, 2014. "Fresh Patterns of Liberalization, Bank Return and Return Uncertainty in Africa," Working Papers 14/004, African Governance and Development Institute..
    2. Simplice Asongu, 2014. "Financial development dynamic thresholds of financial globalization: Evidence from Africa," Journal of Economic Studies, Emerald Group Publishing, vol. 41(2), pages 166-195, March.
    3. Simplice A Asongu, 2014. "On the substitution of institutions and finance in investment," Economics Bulletin, AccessEcon, vol. 34(3), pages 1557-1574.
    4. Asongu Simplice, 2012. "Are financial benefits of financial globalization questionable until greater domestic financial development has taken place?," Working Papers 12/007, African Governance and Development Institute..
    5. Simplice Asongu, 2015. "Liberalisation and Financial Sector Competition: A Critical Contribution to the Empirics with an African Assessment," South African Journal of Economics, Economic Society of South Africa, vol. 83(3), pages 425-451, September.
    6. Asongu Simplice, 2013. "Globalization and Africa: implications for human development," International Journal of Development Issues, Emerald Group Publishing, vol. 12(3), pages 213-238, September.
    7. Simplice A. Asongu, 2014. "The “knowledge economy”–finance nexus in SSA and MENA countries," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing, vol. 7(2), pages 200-213, June.
    8. Simplice A. Asongu, 2013. "How has Mobile Phone Penetration Stimulated Financial Development in Africa?," Journal of African Business, Taylor & Francis Journals, vol. 14(1), pages 7-18, April.
    9. Simplice Asongu & Vanessa Tchamyou, 2015. "The Comparative African Regional Economics of Globalization in Financial Allocation Efficiency," Working Papers 15/053, African Governance and Development Institute..
    10. Simplice Asongu, 2014. "The impact of health worker migration on development dynamics: evidence of wealth effects from Africa," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(2), pages 187-201, March.
    11. Simplice Asongu & Vanessa Tchamyou, 2015. "Inequality, Finance and Pro-Poor Investment in Africa," Working Papers 15/052, African Governance and Development Institute..
    12. Simplice A., Asongu, 2011. "New financial intermediary development indicators for developing countries," MPRA Paper 30921, University Library of Munich, Germany.
    13. Simplice A Asongu, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," Economics Bulletin, AccessEcon, vol. 33(1), pages 663-676.

    More about this item

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • D6 - Microeconomics - - Welfare Economics
    • F3 - International Economics - - International Finance


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