Financial liberalisation and industrial development in Malawi

Grant Kabango () and Alberto Paloni ()

No 2010-22, SIRE Discussion Papers from Scottish Institute for Research in Economics (SIRE)

Abstract: It has been suggested that financial liberalisation may be a key policy to promote industrialisation as it removes the credit access constraint on firms, especially small and medium ones. We investigate the effect of credit expansion in the wake of liberalisation on the structure of the industrial sectors in Malawi and find that, in contrast to the hypothesis above, it resulted in an increase in industrial concentration and a decrease in net firm entry, especially in sectors that are more finance dependent. The case of Malawi is interesting because financial liberalisation has been justified precisely as a means for industrial development and because the implementation of the policy has been regarded as relatively successful.

Date: 2010
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Working Paper: Financial liberalisation and industrial development in Malawi (2010)
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