High-Speed Internet, Financial Technology and Banking in Africa

65 Pages Posted: 6 Nov 2019

See all articles by Angelo D'Andrea

Angelo D'Andrea

Bocconi University - BAFFI Center on International Markets, Money, and Regulation

Nicola Limodio

Bocconi University; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Bocconi University - Baffi Carefin Centre

Date Written: November 2019

Abstract

This paper provides empirical evidence on the effect of high-speed internet on financial technology and banking in Africa. Our test combines data on 551 banks and 28,171 firms with the staggered arrival of bre-optic submarine cables in Africa. High-speed internet promoted private-sector lending by banks, and credit and sales by firms. These results are consistent with an extensive adoption of financial technologies, like real-time gross settlement systems (RTGS), lowering transaction costs in African interbank markets. We find that liquidity management considerably changed for banks being weak interbank users prior to high-speed internet. In fact, such banks lowered their internal liquidity hoarding by 10%, increased interbank transactions by 40% and expanded lending by 37%. Analogously, firms in countries with weak pre-existing interbank markets presented stronger effects at the cable arrival. These results are consistent with high-speed internet promoting financial technology adoption, liquidity and credit.

Keywords: Fintech, Banking, Investment, Financial Development

JEL Classification: G2, G21, O16, O12

Suggested Citation

D'Andrea, Angelo and Limodio, Nicola, High-Speed Internet, Financial Technology and Banking in Africa (November 2019). BAFFI CAREFIN Centre Research Paper No. 2019-124. Available at SSRN: https://ssrn.com/abstract=3480373 or http://dx.doi.org/10.2139/ssrn.3480373

Angelo D'Andrea

Bocconi University - BAFFI Center on International Markets, Money, and Regulation ( email )

Milano, 20136
Italy

Nicola Limodio (Contact Author)

Bocconi University ( email )

Via Roentgen 1
Milano, MI 20136
Italy

HOME PAGE: http://www.nicolalimodio.com

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

Bocconi University - Baffi Carefin Centre ( email )

Via Roentgen 1
Milan
Italy

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