Financial Development and Economic Growth in Africa: Lessons and Prospects

Abstract

This paper examines financial institutions within Africa if they are well positioned to assist the continent out of poverty with their growth prone capability. The study uses dynamic panel with variables as described by King & Levine (1993) and observed bi-directional relationship between finance and growth. Proxy for trade was not significant while evidences point to poor credit allocation to the private sector. The research also supports non-inclusion of money outside bank coffers in the King & Levine (1993) paper. The study covers 1970 to 2005 for about thirty-one African countries.