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High-Speed Internet, Financial Technology and Banking in Africa

Angelo D'Andrea and Nicola Limodio

No 19124, BAFFI CAREFIN Working Papers from BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy

Abstract: This paper provides empirical evidence on the effect of high-speed internet on financial technology and banking in Africa. Our test combines data on 551 banks and 28,171 firms with the staggered arrival of fibre-optic submarine cables in Africa. High-speed internet promoted private-sector lending by banks, and credit and sales by firms. These results are consistent with an extensive adoption of financial technologies, like real-time gross settlement systems (RTGS), lowering transaction costs in African interbank markets. We find that liquidity management considerably changed for banks being weak interbank users prior to high-speed internet. In fact, such banks lowered their internal liquidity hoarding by 10%, increased interbank transactions by 40% and expanded lending by 37%. Analogously, firms in countries with weak pre-existing interbank markets presented stronger effects at the cable arrival. These results are consistent with high-speed internet promoting financial technology adoption, liquidity and credit.

Keywords: Fintech; Banking; Investment; Financial Development (search for similar items in EconPapers)
JEL-codes: G2 G21 O16 O12 (search for similar items in EconPapers)
Pages: 65
Date: 2019
New Economics Papers: this item is included in nep-afr, nep-ban, nep-cfn, nep-fdg, nep-ict and nep-pay
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