The Finance and Growth Debate in Africa: What Role for Financial Inclusion?

Topic :

Financial development has been widely acknowledged as a contributor to economic growth. Recent evidence however reflects a dwindling of this relationship,especially in economies with high financial depth ratios. This paper reviews the author’s work in this field dating back 30 years. Although most literature supports the link between finance and growth, the robustness of the evidence seems to have waned mainly in response to financial instability occasioned by financial liberalisation and excessive credit growth. While financial depth may no longer be strongly correlated with economic growth, we provide evidence of the crucial role that access to finance could play in promoting financial development and bootstrapping economic growth in Africa. In particular, we emphasise the role of microfinance in enhancing access to finance by individuals and SMMEs. Properly designed, microfinance institutions would help promote economic growth and reduce poverty in Africa.

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