Financial Inclusion and Bank Competition in Sub-Saharan Africa

IMF Working Papers, December 7, 2018

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Financial Inclusion and Bank Competition in Sub-Saharan Africa

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Bibliographic details

• Authors: Azanaw Mengistu, Hector Perez-Saiz
• Published: December 7, 2018
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484386163.001

Study objective and data

• Objective: Study how competition and financial soundness affect financial inclusion in Sub-Saharan Africa (SSA).
• Data: Detailed individual-level survey data combined with key country-level indicators of bank competition and financial soundness.
• Financial products analyzed: bank accounts, credit and debit cards, bank loans.

Key findings

• Competition effects:
  • More competition tends to increase the probability of access to bank accounts, credit and debit cards, and bank loans.
• Financial soundness (bank balance-sheet variables) effects:
  • No strong evidence that bank-balance-sheet variables (i.e. capital adequacy or liquidity) affect borrowing by individuals.
• Implication for economic outcomes:
  • Improvements in financial inclusion could potentially impact economic growth and long-term economic development.

Policy implications and recommendations

• Design regulations that foster bank competition to improve access to financial products.
• Consider that strengthening bank balance-sheet measures (capital adequacy, liquidity) may not directly increase individual borrowing; regulatory focus on competition may be more effective for improving inclusion.
• Use findings to inform policy choices aimed at expanding access to accounts, payment instruments, and credit in SSA.

Subjects and keywords

• Subject: Banking; Capital adequacy requirements; Competition; Credit; Financial inclusion; Financial markets; Financial regulation and supervision; Fiscal accounting and reporting; Money; Public financial management (PFM)
• Keywords: accounts; bank balance-sheet variable; bank balance-sheet weakness; bank competition; bank lending-deposit; Capital adequacy requirements; competition; Credit; debit cards; Financial inclusion; financial soundness; Fiscal accounting and reporting; Global; Lerner index; liquid asset ratio; money bank; Sub-Saharan Africa; WP

IMF Working Paper — "Financial Inclusion and Bank Competition in Sub-Saharan Africa" (Working Paper No. 2018/256, December 7, 2018).

Content in this bundle

• Financial Inclusion and Bank Competition in Sub-Saharan Africa, WP/18/255, December 2018
  • Financial Inclusion and Bank Competition in Sub-Saharan Africa, WP/18/255, December 2018 (Markdown version)
  • Financial Inclusion and Bank Competition in Sub-Saharan Africa, WP/18/255, December 2018 (PDF)