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

26 Pages Posted: 5 Jan 2010

See all articles by George Anayiotos

George Anayiotos

affiliation not provided to SSRN

Hovhannes Toroyan

affiliation not provided to SSRN

Date Written: November 2009

Abstract

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.

Keywords: Access to capital markets, Cross country analysis, Data analysis, Data quality assessment framework, Development, Economic models, Financial institutions, Financial sector, Governance, Political economy, Sub-Saharan Africa

Suggested Citation

Anayiotos, George and Toroyan, Hovhannes, Institutional Factors and Financial Sector Development: Evidence from Sub-Saharan Africa (November 2009). IMF Working Paper No. 09/258, Available at SSRN: https://ssrn.com/abstract=1531502

George Anayiotos (Contact Author)

affiliation not provided to SSRN

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Hovhannes Toroyan

affiliation not provided to SSRN

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