Financial Development, Foreign Banks and Economic Growth in Africa

Younesse El Menyari

African Development Review, 2019, vol. 31, issue 2, 190-201

Abstract: This study aims to examine and analyze the impact of financial development and foreign bank penetration on African economies. An empirical study for the period 1995–2015 is conducted using the system GMM estimator. Our empirical results indicate that foreign bank entry has a positive and significant impact on economic growth in the countries of North and Southern Africa, while in the other two regions considered in this study (West and Central Africa, East Africa) the impact is negative and rarely significant. In addition, our results show that the development of financial markets has a positive and significant effect on economic growth only in the Southern African region. The paper concludes that policymakers should focus on long‐term policies to strengthen the financial sector to truly meet the needs of African people.

Date: 2019
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