Financial Sector Readiness to Support Economic Actives under COVID-19: The Case of African Continent

Abstract

The magnitude of COVID-19 is yet to be estimated and felt by countries. The pandemic has posed a major disruption to economic activity across the world. Using the model by Battese, G.E., Coelli, T.J. (1995) the translog production frontier was adopted to estimate technical efficiency of the financial sector of the continent. The 24 countries selected were based on the availability of data to cover our variables of interest. The findings were that generally the financial sector in the continent have performed above average (72%) over the period of study. Also lower middle income countries are relatively going to have more problems with pandemic. However, the probability of the continent not plunging into economic depression with the support of the financial sector is 0.42 which is not encouraging. It is recommended that policies to address interest rate margin, liquidity and market concentration should be managed properly to improve technical efficiency of the financial sectors of the continent. This will ensure that relief packages and grants are managed properly.

Keywords: Africa, COVID-19, Financial Sector, Technical Efficiency, Translog Production Frontier

JEL Classification: G2, E4