## Understanding the Growth of African Financial Markets

_IMF Working Papers, August 1, 2009_

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## Bibliographic details
- Authors: Mihasonirina Andrianaivo, Charles Amo Yartey
- Published: August 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451873290.001

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### Summary findings
- The paper examines empirically the determinants of financial market development in Africa with an emphasis on banking systems and stock markets.
- Main determinants of banking sector development in Africa:
  - income level
  - creditor rights protection
  - financial repression
  - political risk
- Main determinants of stock market development:
  - stock market liquidity
  - domestic savings
  - banking sector development
  - political risk
- Capital account liberalization:
  - Liberalizing the capital account promotes financial market development only in countries with high incomes, well- developed institutions, or both.
- Political risk:
  - The powerful impacts of political risk on both banking sector and stock market development suggest that resolution of political risk may be important to the development of African financial markets.

### Policy implications and recommendations
- Addressing political risk should be a priority to foster development of both banking sectors and stock markets in Africa.
- Strengthening creditor rights protection can support banking sector development.
- Reducing financial repression can facilitate banking sector expansion.
- Enhancing stock market liquidity and promoting domestic savings can accelerate stock market development.
- Consider capital account liberalization conditional on achieving higher income levels and stronger institutional development.

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/understanding-the-growth-of-african-financial-markets-23209_