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Banking Efficiency and Financial Development in Sub-Saharan Africa

Author: Sandrine Kablan

Publisher: International Monetary Fund

Published: 2010-06-01

Total Pages: 27

ISBN-13: 1455201197

This study assesses the determinants of banking system efficiency in sub-Saharan Africa (SSA) and asks what, besides the degree of efficiency, explains the low level of financial development in the region. It uses stochastic frontier analysis to measure efficiency and a generalized method of moments system to explain financial development. SSA banks are found to be generally cost-efficient, but nonperforming loans undermine efficiency, which suggests that improvement in the regulatory and credit environments should improve efficiency. The political and the economic environment have held back financial development in SSA.

Financial Development in Sub-Saharan Africa

Author: Mr.Montfort Mlachila

Publisher: International Monetary Fund

Published: 2016-09-14

Total Pages: 79

ISBN-13: 1475532407

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This paper discusses how sub-Saharan Africa’s financial sector developed in the past few decades, compared with other regions. Sub-Saharan African countries have made substantial progress in financial development over the past decade, but there is still considerable scope for further development, especially compared with other regions. Indeed, until a decade or so ago, the level of financial development in a large number of sub-Saharan African countries had actually regressed relative to the early 1980s. With the exception of the region’s middle-income countries, both financial market depth and institutional development are lower than in other developing regions. The region has led the world in innovative financial services based on mobile telephony, but there remains scope to increase financial inclusion further. The development of mobile telephone-based systems has helped to incorporate a large share of the population into the financial system, especially in East Africa. Pan-African banks have been a driver for homegrown financial development, but they also bring a number of challenges.

Sub-Saharan Africa

Author: Ms.Catherine A. Pattillo

Publisher: International Monetary Fund

Published: 2006-08-28

Total Pages: 62

ISBN-13: 9781589065659

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Financial sectors in low-income sub-Saharan Africa (SSA) are among the world's least developed. In fact, assets in most low-income African countries are smaller than those held by a single medium-sized bank in an industrial country. The absence of deep, efficient financial markets seriously challenges policy making, hinders poverty alleviation, and constrains growth. This book argues that building efficient and sound financial sectors in SSA countries will improve Africa's economic prospects. Based on a review of the key features of financial systems, it discusses the main obstacles and challenges that financial structures pose for SSA economies and recommends steps that could address major shortcomings in implementing the reform agenda.

Bank Efficiency in Sub-Saharan African Middle Income Countries

Author: Chuling Chen

Publisher: International Monetary Fund

Published: 2009-01-01

Total Pages: 34

ISBN-13: 1451871619

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We use bank level data to study the efficiency of banks in Sub-Saharan African middle-income countries and provide possible explanations for the difference in the efficiency levels of banks. We find that banks, on average, could save 20-30 percent of their total costs if they were operating efficiently, and that foreign banks are more efficient than public banks and domestic private banks. Among the factors that could affect the efficiency levels are macroeconomic stability, depth of financial development, the degree of market competition, strong legal rights and contract laws, and better governance, including political stability and government effectiveness. Our findings point to the importance of policies that aim to build stronger institutions, promote more competition, and improve governance.

Evolving Banking Trends in Sub-Saharan Africa

Author: Mr. Mauro Mecagni

Publisher: International Monetary Fund

Published: 2015-09-16

Total Pages: 39

ISBN-13: 1513501755

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Banking in SSA has undergone very significant changes over the last two decades. Financial liberalization and related reforms, upgrades in institutional and more recently the expansion of cross-border banking activities and the rapid development of Pan-African banking groups are signaling greater financial integration and significant changes in the African banking and financial landscape. Nonetheless, excess liquidity in many countries reflects limited lending opportunities and, despite improvements, asset quality and provisioning remain comparatively low. Dollarization has also been a persistent characteristic in several natural resource-dependent economies. This paper discusses key stylized facts and trends of banking development in SSA, looking at a variety of dimensions such as size, depth, soundness, and efficiency. It also assess the rapid expansion of pan-African banking groups, which have overtaken the role of the European and U.S. banks that had traditionally dominated banking activities in SSA, creating significant cross-border networks and becoming the largest participants in new syndicates and large bilateral loans to finance infrastructure development.

FinTech in Sub-Saharan African Countries

Author: Mr.Amadou N Sy

Publisher: International Monetary Fund

Published: 2019-02-14

Total Pages: 61

ISBN-13: 1484385667

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FinTech is a major force shaping the structure of the financial industry in sub-Saharan Africa. New technologies are being developed and implemented in sub-Saharan Africa with the potential to change the competitive landscape in the financial industry. While it raises concerns on the emergence of vulnerabilities, FinTech challenges traditional structures and creates efficiency gains by opening up the financial services value chain. Today, FinTech is emerging as a technological enabler in the region, improving financial inclusion and serving as a catalyst for the emergence of innovations in other sectors, such as agriculture and infrastructure.

Measuring Financial Development in Sub-Saharan Africa

Author: Mr.Enrique Gelbard

Publisher: International Monetary Fund

Published: 1999-08-01

Total Pages: 29

ISBN-13: 1451852800

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This study introduces an index for measuring financial development and a set of six indices representing key characteristics of the financial systems in 38 sub-Saharan African countries. The results show that these countries have made good progress in improving and modernizing their financial systems during the last decade, particularly with regard to financial liberalization and the adoption of indirect instruments of monetary policy. In many countries, however, the range of financial products remains extremely limited, interest rate spreads are wide, capital adequacy ratios are insufficient, judicial loan recovery is a problem, and the share of nonperforming loans is large.

Institutional Factors and Financial Sector Development

Author: George C. Anayiotos

Publisher: International Monetary Fund

Published: 2009-11-01

Total Pages: 27

ISBN-13: 1451874049

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The paper assesses the effects of certain institutional factors on financial sector development in Sub- Saharan Africa (SSA). Data Envelopment Analysis (DEA) is applied to determine the extent to which these institutions affect the financial sector, and to suggest which institutions play a more critical role in each country. Results suggest that institutional factors affect financial depth and access to financial services more than asset quality and profitability (measured by nonperforming loans (NPL) and return on equity (ROE). The results also suggest that depth of credit information has the strongest influence on the NPL ratio, and political stability affects access the most. Based on model findings, policy implications on prioritizing institutional reforms to enhance financial sector development are suggested for individual countries and for country groups.

Banking in Sub-Saharan Africa

Author: Mr.Montfort Mlachila

Publisher: International Monetary Fund

Published: 2013-09-26

Total Pages: 34

ISBN-13: 1484344537

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Many countries in sub-Saharan Africa (SSA) have seen accelerated growth for an extended period of time since the mid-1990s, making a clear break with their long stagnant growth during the previous two decades. That said, the region faces significant challenges over the medium to long term, including reducing poverty, overcoming infrastructure bottlenecks, enhancing productivity and skill levels, and improving the business climate, among others. The banking sector remains underdeveloped in SSA, thus reducing its contribution to growth, although its limited integration with global financial markets helped countries weather adverse effects of the global financial crisis. It is imperative that the banking sector plays a more active role in SSA, in order to achieve sustainable growth led by the private sector. This paper, building on the recent literature on SSA, discusses the main features of the region’s growth and macroeconomic performance in recent years and the outlook for the coming years; it then reviews the main features of SSA banking systems and how they were affected by the global economic crisis, while flagging some factors that could influence financial sector developments in SSA in the period ahead.

Financial Sector Development in Africa

Author: Thorsten Beck

Publisher: World Bank Publications

Published: 2012-12-03

Total Pages: 254

ISBN-13: 0821396293

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This edited volume contains eight studies of financial sector challenges in Africa. They discuss expanding access, lengthening contracts, safeguarding finance and implementing financial sector reform in politically difficult environment.