Original Research

Can financial development influence economic growth: The sub-Saharan analysis?

Thobeka Ncanywa, Karabo Mabusela
Journal of Economic and Financial Sciences | Vol 12, No 1 | a194 | DOI: https://doi.org/10.4102/jef.v12i1.194 | © 2019 Thobeka Ncanywa, Karabo Mabusela | This work is licensed under CC Attribution 4.0
Submitted: 07 March 2018 | Published: 26 February 2019

About the author(s)

Thobeka Ncanywa, Department of Economics, Faculty of Law and Management, University of Limpopo, South Africa
Karabo Mabusela, Department of Economics, Faculty of Law and Management, University of Limpopo, South Africa

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Orientation: Financial sector development in a vast majority of sub-Saharan African countries has the potential to reduce the volatility of growth.

Research purpose: This article is aimed at determining the influence of financial development on economic growth in selected sub-Saharan African countries.

Motivation for the study: In most of the sub-Saharan countries, financial sectors are among the world’s least developed, and the absence of deep, efficient financial markets puts major constraints on economic growth.

Research approach/design and method: This article employed panel autoregressive and distributive lag model to determine the relationship between financial development and economic growth.

Main findings: The results indicated that there exists a short- and a long-run relationship between financial development and economic growth in the selected countries. In the long run, bank credit to the private sector and liquid liabilities have a positive influence on economic growth, with gross domestic savings exhibiting a negative influence.

Practical/managerial implications: This article makes recommendations that as financial stability, both globally and within countries, generates jobs and improves productivity, more effort should be made in ensuring an effective and sound developed financial sector system.

Contribution/value-add: The financial-economic growth nexus indicate that a well-functioning financial market development can promote economic growth. However, some controversies exist as some evidence indicated that a negative or positive financial development–growth nexus exists, so there was a need to find out what is the sub-Saharan case. Furthermore, there was a need to find development regulatory and macroeconomic policies that enhance growth.


Sub-Saharan Africa; financial development; economic growth; ARDL; Impulse Response functions


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