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The African Financial Development Gap

Author

Listed:
  • 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.

Suggested Citation

  • Franklin Allen & Elena Carletti & Robert Cull & Jun QJ Qian & Lemma Senbet, 2010. "The African Financial Development Gap," Economics Working Papers ECO2010/24, European University Institute.
  • Handle: RePEc:eui:euiwps:eco2010/24
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jacob Kolster, 2015. "North Africa - Working paper - Does foreign direct investment improve welfare in North African countries?," Working Paper Series 2162, African Development Bank.
    2. 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.
    3. Issouf Soumaré & Fulbert Tchana Tchana, 2015. "Causality between FDI and Financial Market Development: Evidence from Emerging Markets," World Bank Economic Review, World Bank Group, vol. 29(suppl_1), pages 205-216.
    4. Thorsten Beck & Samuel Munzele Maimbo, 2013. "Financial Sector Development in Africa : Opportunities and Challenges," World Bank Publications, The World Bank, number 11881, August.

    More about this item

    Keywords

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

    JEL classification:

    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies
    • K0 - Law and Economics - - General
    • G0 - Financial Economics - - General

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