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2015•Unpublished venueRequires access

What determines Financial Depth and Intermediation Efficiency of banks in Sub-Saharan African? - A two step approach

Annette Juma Boliba

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Abstract

This study aims to find out why banks in Sub-Saharan Africa (SSA) invest only a small portion of their deposits in loans to the private sector but rather invest in liquid assets and therefore exhibit excess liquidity compared to other developing economies. The prerequisite for an efficient intermediation of banks is a large volume of credit relatively to GDP, which indicates the level of financial depth and ranks among the financial development measures respectively. Based on that fact, this study takes a two-step approach to explain what determines the intermediation efficiency of banks.

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What this paper is about

This study aims to find out why banks in Sub-Saharan Africa (SSA) invest only a small portion of their deposits in loans to the private sector but rather invest in liquid assets and therefore exhibit excess liquidity compared to other developing economies. The prerequisite for an efficient intermediation of banks is a large volume of credit relatively to GDP, which indicates the level of financial depth and ranks among the financial development measures respectively. Based on that fact, this study takes a two-step approach to explain what determines the intermediation efficiency of banks.

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Available abstract

This study aims to find out why banks in Sub-Saharan Africa (SSA) invest only a small portion of their deposits in loans to the private sector but rather invest in liquid assets and therefore exhibit excess liquidity compared to other developing economies. The prerequisite for an efficient intermediation of banks is a large volume of credit relatively to GDP, which indicates the level of financial depth and ranks among the financial development measures respectively. Based on that fact, this study takes a two-step approach to explain what determines the intermediation efficiency of banks.

Key concepts: Intermediation, Financial intermediary, Market liquidity, Financial system, Business, Monetary economics, Finance, Economics

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