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The effect of financial sector development on economic growth of selected sub‐Saharan Africa countries

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  • Dagim Taddese Bekele
  • Adisu Abebaw Degu

Abstract

The effect of financial sector development on economic growth is among the main debatable issue in economics and policymaking. Thus, by using different financial sector dimensions, this research tried to look at the effect of financial sector development on the economic growth of 25 sub‐Saharan Africa countries for the period 2010–2017. Precisely, three dynamic panel data models that look at the effect of financial sector depth, access, and efficiency on economic growth were estimated by two‐step system GMM estimation. In this research, credit extended to the private sector per GDP, commercial bank branch per 100,000 adult population, and Return to assets were used as a proxy and measures for financial sector depth, access, and efficiency respectively. Accordingly, the results revealed that financial sector depth, access, and efficiency have a positive and statistically significant effect on these countries' economic growth. Therefore, it is recommended that the concerned bodies that broadening the depth of financial institutions by giving more credit to the private sector is essential. Besides, the financial institutions will have to be expanded to increase their accessibility to the mass and take some measures to promote their efficiency.

Suggested Citation

  • Dagim Taddese Bekele & Adisu Abebaw Degu, 2023. "The effect of financial sector development on economic growth of selected sub‐Saharan Africa countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2834-2842, July.
    • Handle: RePEc:wly:ijfiec:v:28:y:2023:i:3:p:2834-2842
    DOI: 10.1002/ijfe.2566
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    3. Tesfamlak Gizaw & Zerihun Getachew & Malebo Mancha, 2024. "Financial development and economic growth: evidence from emerging African and Asian countries," Cogent Economics & Finance, Taylor & Francis Journals, vol. 12(1), pages 2398213-239, August.
    4. Donou-Adonsou, Ficawoyi, 2025. "Financial structure and economic efficiency in Sub-Saharan Africa," Global Finance Journal, Elsevier, vol. 67(C).
    5. Nayab Akhtar & Abdul Rashid, 2024. "Financial development and sustainable development: A review of literature," Sustainable Development, John Wiley & Sons, Ltd., vol. 32(6), pages 7114-7139, December.
    6. Michael S. Akpan & Marvelous Aigbedion & Joshua Jeremiah Dandaura & Irimiya Christabel Musa, 2024. "Impact of Financial Sector Development, Trade and Economic Growth in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(8), pages 1880-1894, August.
    7. Strike Mbulawa & Samuel Chingoiro, 2024. "Financial development, institutional quality and economic growth in countries in sub-Saharan Africa (SSA)," International Journal of Business Ecosystem & Strategy (2687-2293), Bussecon International Academy, vol. 6(1), pages 51-62, January.

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