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Effect of Social Capital on the Cost of Banking Intermediation in Sub-Saharan Africa

Author

Listed:
  • David SAWADOGO

    (CEDRES – Université Thomas SANKARA)

  • Relwendé SAWADOGO

    (IBAM, Université Joseph KI-ZERBO)

Abstract

This paper determines whether high social capital contributes to reducing the costs associated with bank intermediation through net interest margins, and consequently, to improving financial efficiency in Sub-Saharan Africa. Using panel data covering the period 2010-2021 for a sample of 296 commercial banks, this paper uses the fixed-effects econometric model to estimate the impact of social capital on the net margin of bank interest rates. The results reveal a negative and significant relationship, thus confirming the theory that increased social capital density does indeed reduce the costs associated with bank intermediation. These results contribute to the existing literature by clarifying the importance of social capital in the context of Sub-Saharan African countries. Furthermore, the results suggest that policymakers could encourage the development of social capital to enhance the efficiency of the banking sector while maintaining adequate lending standards to ensure financial stability.

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Handle: RePEc:rta:retajr:1612
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JEL classification:

  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
  • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
  • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
  • N37 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Africa; Oceania

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