Institutional Factors and Financial Sector Development: Evidence from Sub-Saharan Africa

Author/Editor:

Hovhannes Toroyan ; George C. Anayiotos

Publication Date:

November 1, 2009

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 2009/258

Subject:

Credit Financial sector Financial sector development Legal support in revenue administration Nonperforming loans

English

Publication Date:

November 1, 2009

ISBN/ISSN:

9781451874044/1018-5941

Stock No:

WPIEA2009258

Pages:

25

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