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Regional Financial Integration in Sub-Saharan Africa - An Empirical Examination of its Effects on Financial Market Development


  • Frey, Leo
  • Volz, Ulrich


This paper examines the effects of political agreements on regional financial integration (RFI) on financial market development and access to and cost of finance in Sub-Saharan Africa. Our results suggest that RFI positively affects financial development - measured very broadly as the size of the financial sector, including the liabilities of the central banks - when combined with a sufficient level of institutional quality. If institutional quality is below a threshold level, RFI apparently has negative effects on financial development. However, we can find no significant effects of RFI on the size of the private financial sector or on the efficiency of the banking sector. Regarding the effects of RFI on access to and costs of finance of enterprises in SSA, our results are mixed. We can find no significant effect of RFI on access to finance for all firms in the aggregate, but the results indicate that RFI actually impedes small firms' access to finance. Furthermore, there is a significant positive influence of foreign bank involvement on the severity of the credit constraint for small enterprises, while we don't find such an influence for large enterprises. These results provide some support for the foreign bank barrier hypothesis in the context of RFI.

Suggested Citation

  • Frey, Leo & Volz, Ulrich, 2011. "Regional Financial Integration in Sub-Saharan Africa - An Empirical Examination of its Effects on Financial Market Development," Proceedings of the German Development Economics Conference, Berlin 2011 29, Verein für Socialpolitik, Research Committee Development Economics.
  • Handle: RePEc:zbw:gdec11:29

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    Cited by:

    1. Mirdala, Rajmund & Svrčeková, Aneta & Semančíková, Jozefína, 2015. "On the Relationship between Financial Integration, Financial Liberalization and Macroeconomic Volatility," MPRA Paper 66143, University Library of Munich, Germany.
    2. Ovidiu Stoica & Delia-Elena Diaconasu, 2012. "Regional Economic Integration And National Financial Supervision. A Comparative Study," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(14), pages 1-23.
    3. Ahmed, Abdullahi D., 2016. "Integration of financial markets, financial development and growth: Is Africa different?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 42(C), pages 43-59.
    4. Bonga-Bonga, Lumengo & Mabe, Queen Magadi, 2016. "How financially integrated are trading blocs in Africa?," MPRA Paper 75716, University Library of Munich, Germany.
    5. J. Acalin & B. Cabrillac & G. Dufrénot & L. Jacolin & S. Diop, 2015. "Financial integration and growth correlation in Sub-Saharan Africa," Working papers 561, Banque de France.
    6. repec:eco:journ1:2017-03-82 is not listed on IDEAS

    More about this item


    Regional financial integration; Sub-Saharan Africa; financial development; access to finance;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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