LONDON METROPOLITAN
BUSINESS SCHOOL
ECONOMICS SUBJECT
GROUP
FDI SPILLOVERS AND GROWTH IN AFRICA: THE ROLE OF LOCAL FINANCIAL MARKETS.
PHILIP KOKU VIENYO
AKPAKLI
17th MAY,
2013
This is an extract of the main paper...
ABSTRACT
The purpose of this paper
is to examine the various links among foreign direct investment, financial
markets and growth in Africa over the last two decades (1991 – 2011). The work
is based on a model developed by Alfaro et al. (2004) which presents an economy
with a continuum of agents indexed by their level of ability. Agents have two
choices: they can work for the foreign company in the FDI sector and use their
wealth to earn a return or they can choose to undertake entrepreneurial
activities, which are subject to a fixed cost. Better financial markets allow
agents in the economy to take advantage of knowledge spillovers from FDI. The
empirical evidence suggests that FDI plays an important role in contributing to
economic growth in Africa. However, the level development of local financial
markets is crucial for these positive effects to be realized.
1.
INTRODUCTION
This study will examine the various links between foreign direct
investment (FDI), local financial markets and economic growth in Africa.
According to the World Bank, FDI measures the net inflow of investment to acquire a lasting
management interest (10 percent or more of voting stock) in an enterprise
operating in an economy other than that of the investor. It is the sum of
equity capital, reinvestment of earnings, other long-term capital, and
short-term capital as shown in the balance of payment[1].
Over the last decade, developing countries have increasingly offered
incentives to attract foreign firms to their economies. This is because
economists and policy makers agree that FDI can have important positive effects
on a host country’s development. In addition to the direct capital financing it
supplies, FDI can be a source of valuable technology and know-how while
fostering linkages with local firms, which can help jump-start an economy.
Domestic firms may benefit from accelerated diffusion of new technology if
foreign firms introduce new products or processes to the domestic market. In
some cases, domestic firms might benefit just from observing these foreign
firms (Blomstrom and Kokko, 1997). In other cases, technology diffusion might
occur from labour turnover as domestic employees move from foreign to domestic
firms. These benefits together with the direct capital financing it provides,
suggest that FDI can play an important role in modernizing the national economy
and promote growth.
The
empirical evidence on FDI’s impact on a host country’s growth is, however,
ambiguous at both micro and macro levels (Havranek and Irsova 2010; Görg and
Greenaway, 2004; Lipsey 2002). According to Blomström and Kokko (2003),
spillovers are not automatic since local conditions have an important effect in
influencing firms’ adoption of foreign technologies and skills. Lipsey, (2002)
also argues that there is a need for more research on different circumstances
that obstruct or promote these spillovers. We wish to add to the existing
knowledge on the subject by giving a special attention to local conditions in
the African region, especially, the role of local financial institutions in
channelling the potential FDI spillovers to promote economic growth.
While FDI
can contribute to the development efforts of a country, domestic market
conditions are crucial in determining not only the quantity but also the
quality of FDI. These conditions include (but are not limited to) the policy
environment of the local country, productive assets available, and
infrastructure. Among these conditions, the development of local financial
markets in particular can adversely limit the economy’s ability of taking
advantage of such potential FDI spillovers (Alfaro et al., 2000).
The rest of this paper is organised as follows. Section 2 presents an
overview of global FDI inflows, as well as, the trend of FDI and growth in some
selected African countries. In section 3, we will discuss some history of financial
development in Africa, highlight some challenges to financial markets
development in the region and prescribe solutions to these challenges.
Thereafter, we will discuss the general composition of Africa’s financial
sector. Section 4 contains a review of the literature on FDI spillovers, growth
and the role financial markets. In section 5, we build a conceptual framework. Section
6, will discuss the data that will be employed in the study. In Section 7, we will
discuss our results and empirical analysis. We conclude in section 8.
2.
FDI
INFLOWS AND GROWTH IN SOME SELECTED AFRICAN COUNTRIES
This section delves briefly into a description
of observed trends in FDI inflows around the world. We will also discuss the trend
of FDI inflows in some selected African countries and examine how these
economies have performed in recent years.
2.1.
FDI Inflows in a Global
Context
Figure 1 below, shows
that global FDI inflow declined significantly from 2008 due to the global
financial crisis. The rise in inflows of about 45 percent in 2007, declined
drastically to about negative 10 percent in 2008. In 2009, FDI inflows fell
further to an all-time low of about negative 47 percent[1].
FDI inflows surpassed their pre-crisis average in 2011, despite turmoil in the
global economy, but remained about 23 percent short of the 2007 peak[2].
Source: Culled from
World Bank data:
With respect to
global FDI inflows to the various regions in the world, Europe and Central Asia
received the greatest share of global FDI inflows, about 49 percent in 2006
through to about 32 percent in 2011. East Asia and Pacific countries also
received a significant share of global FDI inflows. Sub-Saharan African (SSA)
countries, however, received the lowest FDI inflows from 2006 to 2010. In 2011,
however, South Asia countries received the lowest FDI inflows.
The trend of global
FDI inflow is clearer when countries are classified into income groups, Table 1
shows the share of global FDI inflows. From the table it is evident that FDI
inflows to high income countries were over 60 percent on average from 2006 to
2011. Low income countries received an average of about 0.71 percent of the
global FDI inflow in the same period. The intuition which appears fairly clear
is that FDI flows to countries with high incomes than to low income countries.
Table 1:
Share of Global FDI net inflows (in percent)
|
||||||
REGIONS
|
2006
|
2007
|
2008
|
2009
|
2010
|
2011
|
East Asia and
Pacific
|
16.55
|
15.77
|
17.53
|
24.38
|
34.75
|
31.24
|
Europe and
Central Asia
|
49.19
|
53.19
|
47.95
|
38.95
|
22.39
|
32.04
|
Latin America
and Caribbean
|
5.44
|
6.16
|
7.34
|
9.32
|
10.84
|
10.40
|
Middle East
and North Africa
|
5.09
|
3.73
|
4.96
|
7.49
|
5.51
|
3.33
|
North America
|
21.19
|
18.63
|
18.13
|
13.45
|
22.04
|
18.28
|
South Asia
|
1.52
|
1.32
|
2.32
|
3.41
|
2.30
|
2.20
|
Sub-Saharan
Africa
|
1.02
|
1.21
|
1.78
|
3.00
|
2.17
|
2.52
|
World
|
100
|
100
|
100
|
100
|
100
|
100
|
Least
developed countries
|
0.66
|
0.58
|
0.81
|
1.43
|
1.26
|
1.16
|
OECD members
|
70.15
|
71.50
|
65.14
|
51.63
|
44.31
|
51.50
|
Euro area
|
22.38
|
27.35
|
20.46
|
23.43
|
9.57
|
19.69
|
European
Union
|
40.64
|
44.91
|
40.0
|
26.91
|
13.81
|
25.08
|
High income
|
76.58
|
77.02
|
70.7
|
62.57
|
55.73
|
60.29
|
Low income
|
0.31
|
0.39
|
0.52
|
0.81
|
1.11
|
1.13
|
Middle income
|
23.12
|
22.59
|
28.78
|
36.62
|
43.16
|
38.58
|
Source: Culled from
World Bank Data
2.2.
Trend
of FDI Inflows and Growth in Selected African Countries
Africa has
experienced significant and persistent growth over the last decades and
analysts predict the entire African continent will grow at over 5 percent in
the next five years (World Bank 2012). It is also important to point out that
Ghana experienced one of the highest GDP growths in the world of over 14
percent in 2011. Most of the selected
African countries in figure 2 below, experienced higher average GDP
growth than the World’s average of about 2.7 percent from 1990 to 2011.
Sub-Saharan Africa had an average GDP growth of about 3.5 percent in the same
period. Cote d’Ivoire and Zimbabwe have low growths partly because of recent
civil unrests in those countries.
In figure 3,
the chart tracks the trend of economic growth and FDI inflows to Sub-Saharan
Africa as a whole over the last two decades. From a growth rate of 1.2 percent
in 1990, the region achieved an impressive 4.2 percent growth in 2011, despite
the global economic slowdown. Though the share of FDI inflows to the continent
is still relatively low compared to the rest of the world, the last decade has
also seen some significant increases, from around 0.42 percent in 1990 to over
3 percent in 2011.
Source: Culled from
World Bank Data:
Individual country
analysis show similar trends, for example, FDI inflows to Ghana have increased
from about 0.25 percent of GDP in 1990 to about 9.5 percent of GDP in 2008.
Inflows decreased slightly from 2009 due to the global financial crisis and in
2011 it was about 8.2 percent of GDP. Ghana’s economy has been growing steadily
in relation with of this new influx of money into the economy. From about 3.3
percent in 1990, the economy grew to about 14.4 percent in 2011 as shown in figure
4. Uganda, like Ghana, has experienced steady increases in FDI inflows over
the last two decades, from as low as negative 0.1 percent of GDP in 1990 to 6.6
percent of GDP in 2007. Like many countries the global financial crisis caused
a reduction in FDI inflows to Uganda from 2008 and in 2011 inflows were about
4.7 percent of GDP. The economy of Uganda however, went through phases of
relatively high and low growths but on average economic growth was over 6.5
percent annually. Figure 5 charts Uganda’s FDI inflows and economic growth from
1990-2011.
Zambia and Namibia
has also followed similar patterns generally with respect to FDI inflows and
economic growth as can be seen in figure 6 and figure 7. The last
ten years especially has been very favourable to Africa in terms of economic
growth. If the continent continues on this path of growth, which is higher than
the rate the rest of the world is growing, it will not be long before it will
catch up with the developed counties. This is consistent with Solow (1956) model, which predicts long run convergence and
states that countries that start from a lower level of output will grow faster
and will catch up with richer countries.
3. FINANCIAL DEVELOPMENT
IN AFRICA
In
this section a brief background of the financial sector in Africa is discussed.
Thereafter, challenges to financial sector development in the region are
identified and explained. We will prescribe some solutions to these challenges.
Lastly we will discuss the general composition of the financial sector in the
region.
3.1.
Background
Africa continues to
lag behind other regions of the world in terms of financial sector development
and regional integration. No active interbank market activities or significant
capital flows normally take place within the continent. In order to analyse the
reasons behind this situation, it is important first to note that Africa is a
very large continent with a variety of economies and financial sectors at
different stages of development. In addition, per capita income is generally
low and income distribution skewed.
Financial development
in the continent is largely uneven. Countries like Egypt, Morocco, and Tunisia
in the North and South Africa in the South have reached a relatively high level
of sophistication in terms of financial sector services. There is another group
that is witnessing a steady expansion of the financial sector (Botswana,
Cameroon, Ghana, Kenya, Mauritius, Namibia, Nigeria, Senegal, Tanzania, Uganda,
and Zambia). The remaining countries lag considerably behind, especially those
that are recovering from years of social unrest and hostilities (Angola, Chad,
Congo DR, Cote d’Ivoire, Eritrea, Ethiopia, Liberia, Rwanda, and Sierra Leone).
Lastly, Zimbabwe, which used to have a solid base for strong financial sector development
has gradually witnessed rapid regression for various reasons, including weak
macro policies that have led to a prolonged bout of hyperinflation (Russo and
Ugolini, 2008).
To understand better
the unevenness of financial sector development in Africa, it may be helpful to
recall briefly the history of the continent, in particular Sub-Saharan Africa
(SSA). In this region, formal banking began with the establishment of “colonial
banks”. These were mostly interested in providing services to colonial enterprises
engaged in mining and manufacturing. They were also used as captive banks to
finance growing public sectors. Following independence in the 1960’s, most
colonial banks were nationalized and a number of development banks created in
particular to finance the agricultural sector. Owing to the then prevailing
political ideologies, government intervention and protectionism became the key
policies. Banks were largely devoted to channel resources to the Government and
preferential sectors. Central banks were assigned responsibility for credit
allocation and economic development rather than safeguarding monetary
stability. Moreover they were given very little independence in conducting
monetary policy and remained subordinated to the Finance Ministry, as in the
colonial period. Assessment of risk and efficiency of bank credits was not made
according to the prevailing best practices and no effective banking supervision
and enforcement were put in place.
In a matter of years,
the banking sector collapsed in several African countries burdened by
nonperforming loans, many of which were made to politically connected
individuals and companies. Most development banks were closed leaving a legacy
of large outstanding debts on the books of the banking sector and ultimately of
the central bank and the government.
A few additional
important points deserve to be highlighted in the history of Africa’s financial
sector. With the exception of the CFA monetary area, the banking sector in most
countries was focused on domestic needs only and there was no vision to create
regional markets in order to benefits from economies of scale and develop
inter-country exchanges.
The legacy of different colonial roots (the
English Common Law and the French Civil Code) that are at the basis of the
legal structures in Africa, can also explain some cross-country differences in
financial sector development. The main difference between the two legal systems
lies on their ultimate purpose and objective. The English Common Law, which
influenced the Former British colonies, wanted to protect citizens from abuses
by the State. Thus, it gave flexibility to judges and facilitated trade and
exchanges between private citizens and enterprises. The Civil Code, which
influenced the former French, Belgian, and Portuguese colonies, tended instead
to protect citizens from abuses by powerful property holders and to solidify
State power over private citizens.
3.2.
Financial Sector Composition in Africa
The financial sector in Africa is dominated by
commercial banks. Non-bank financial institutions (NBFI’s) and Microfinance
(MFI’s) are gradually growing and only a small group of countries have a stock
exchange. Banks hold more than 80 percent of total financial assets, followed
by insurance companies, pension funds, and other NBFI’s (Russo and Ugolini, 2008). Interbank
market transactions are very limited and largely confined to within branches of
large foreign owned banks. In some countries, postal offices play an important
role in collecting deposits from remote areas.
As a proxy measure of the state of development
of the financial sector, bank assets as a percentage of GDP vary across
countries in line with income levels and stage of development. They range from
the high levels of Morocco (90 percent), South Africa (87 percent) and Egypt
(68 percent) to the lower levels of Cameroon (12 percent), Malawi and Uganda
(16 percent) and Zambia (17 percent).
On
the insurance side, South Africa is the most dominant with assets of 28% of
GDP. Botswana follows with about 18 percent. Tunisia has the least insurance
company Assets as a percentage GDP of about 0.9 percent. With respect to
private credit by banks and other financial institutions as a percentage of
GDP, the range is from a high of 146 percent for South Africa to as low as 10
percent for Cameroon. Morocco has the
highest liquid liabilities as a percentage of GDP of about 100 percent while
the lowest is about 19 percent for Uganda. These are shown in Table 2
The share of foreign-owned banks has increased
in recent years. Following several banking failures of government owned banks
in most SSA countries, governments have opened doors to new capital and
attracted foreign banks. Only in Algeria, Eritrea, Ethiopia, and Togo the banks
are still mainly government owned (Table 3). In Angola, Egypt, Morocco, and
Tunisia there are both private and public banks operating Old colonial banks or
their descendants have quickly returned, but noteworthy is the appearance of
South African banks and some other large international banks such as Citibank.
A comparison of the financial market structure with other regions shows
that South Africa and some North African countries are comparable to other
emerging markets while SSA, in general lags considerably behind (table 4).
Table 2.
Financial Sector Depth for Selected African Countries in 2009
|
||||
Countries
|
Bank
assets (% of GDP)
|
Insurance
Companies Assets (% of
GDP)
|
Private
credit by banks and other financial institutions ( % of GDP)
|
Liquid
liabilities (% of GDP)
|
Angola
|
32.32
|
1.46
|
17.00
|
30.67
|
Botswana
|
31.00
|
18.71
|
28.01
|
54.03
|
Cameroon
|
12.07
|
1.72
|
10.09
|
19.95
|
Cote d'Ivoire
|
19.35
|
3.63
|
16.38
|
29.87
|
Ghana
|
23.76
|
1.98
|
14.81
|
26.31
|
Kenya
|
40.13
|
7.54
|
28.39
|
41.04
|
Malawi
|
16.10
|
11.33
|
21.83
|
|
Namibia
|
51.46
|
37.35
|
46.79
|
51.79
|
Nigeria
|
43.52
|
2.32
|
35.39
|
37.70
|
South Africa
|
87.53
|
28.18
|
146.90
|
63.58
|
Swaziland
|
23.61
|
22.05
|
25.85
|
|
Uganda
|
16.25
|
1.07
|
11.08
|
18.95
|
Zambia
|
17.98
|
1.38
|
12.45
|
20.82
|
Algeria
|
36.50
|
1.01
|
15.47
|
65.85
|
Egypt, Arab Rep.
|
68.71
|
3.17
|
37.03
|
80.59
|
Morocco
|
90.12
|
17.96
|
74.52
|
100.03
|
Tunisia
|
60.68
|
0.89
|
58.74
|
59.46
|
Table 3:
Bank Ownership in Africa
|
|||
Mainly Government
|
Mainly Foreign
|
Mainly Domestic Private
|
Foreign and Government
|
Algeria
|
Botswana
|
Benin
|
Angola
|
Eritrea
|
Cape Verde
|
Mali
|
Burundi
|
Ethiopia
|
Central
African Republic
|
Mauritania
|
Egypt
|
Togo
|
Chad
|
Mauritius
|
Gabon
|
Cote d'Ivoire
|
Morocco
|
Ghana
|
|
Equatorial
Guinea
|
Nigeria
|
Kenya
|
|
Gambia
|
Rwanda
|
Rwanda
|
|
Guinea Bissau
|
Somalia
|
Senegal
|
|
Guinea
|
South Africa
|
Tunisia
|
|
Lesotho
|
Sudan
|
||
Liberia
|
Zimbabwe
|
||
Madagascar
|
|||
Malawi
|
|||
Mozambique
|
|||
Namibia
|
|||
Niger
|
|||
Seychelles
|
|||
Swaziland
|
|||
Tanzania
|
|||
Uganda
|
|||
Zambia
|
|||
Table 4: Maghreb Countries:
Financial System Structure, 2004
|
|||||||
(In percent of total Assets)
|
|||||||
Commercial Banks
|
Specialized
banks
|
Insurance
Companies
|
Pension funds
|
Other MFI's
|
|||
State-owned
|
Private
|
Total
|
|||||
Algeria
|
83.4
|
9.4
|
92.8
|
2.8
|
4.4
|
||
Mauritania
|
88.2
|
88.2
|
5
|
6.8
|
|||
Morocco
|
35.3
|
24.4
|
59.7
|
11
|
10.6
|
15.6
|
3.1
|
Tunisia
|
30.6
|
39.1
|
69.7
|
3
|
3.4
|
6.5
|
17.4
|
Korea
|
6.5
|
43.2
|
49.7
|
22
|
18.2
|
10.1
|
|
Mexico
|
50.3
|
50.3
|
12.6
|
7.5
|
12.7
|
16.9
|
|
Poland
|
14.3
|
52
|
66.3
|
10.5
|
10.3
|
12.9
|
|
Portugal
|
17.6
|
54.7
|
72.3
|
6.8
|
9
|
3.8
|
8.1
|
Turkey
|
18.3
|
39.6
|
57.9
|
1.8
|
0.8
|
0.6
|
38.9
|
Source:
Russo
and Ugolini (2008)
[1] Data was culled from
the World Bank website:
http://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD
[2] World
Investment Report 2012
4.1.
Challenges
to Financial Development in Africa
It is important to note that despite large
differences in the relative size and level of development of African economies,
sufficient similarities exist between the underlying economic conditions that
face financial institutions in most of the countries to allow several
generalizations. In addition to low savings rates, finance in most African
countries works within an environment that is extreme in four key dimensions:
scale, informality, shocks and governance.
A recent study by the World Bank (Making Finance Work for Africa) has
provided a comprehensive assessment of the financial sector in SSA compared
with other world regions and identified the areas that need improvement.
Although similar difficulties are found elsewhere, the frequency with which
this quartet of environmental obstacles meets up together in Africa means that
policy analysis in the region has a distinctive flavour. The four key dimensions
are discussed as follows.
4.1.1. Scale
The small scale of
many economies does not allow financial service providers to reap scale
economies. The small size of African economies is driven not only by the low
income level across the continent, but also by the small size of countries. The
demand for small transactions (be they savings, insurance, credit, or even
simply payments) means that a large part of the population of African economies
are not commercially viable customers. The dispersed populations in many
African countries make financial service provision outside urban centres
cost-ineffective. Despite the increasing trends toward urbanization, large
parts of the population in Africa still live in rural areas. The small size of
financial systems does not allow financial institutions to recover the fixed
costs of basic systems and might undermine competition if the system does not
sustain more than a small number of institutions.
4.1.2. Informality
Informality refers to
the status not just of client enterprises of financial intermediaries but also
of the markets within which they work; informality reduces the degree to which
reliance can be placed on systematic documentation, adherence to a predictable
schedule or even a fixed place of business. In large parts of the economy and
among economic agents, informality increases the costs and risks for financial
institutions and excludes large segments of the population from formal
financial services. Many firms and households do not have the necessary formal
documentation, such as enterprise registry, land title, or even formal
addresses, to access financial services efficiently.
4.1.3. Shocks
Not all types of shocks are more severe or
more frequent in Africa than elsewhere, but the continent’s history over the
past half-century has been marked by a high incidence of occasional economic or
political meltdowns (associated with conflict, famine, and politico-societal
collapse as well as with external factors) at a frequency of up to one per
decade per country (Arnold 2005; Meredith 2005). Shocks in an economy increases
costs and undermines risk management. On the individual level, these shocks are
related to informality and the consequent fluctuations in income streams among
many micro-enterprises and households. This means these agents are less
attractive for financial institutions. On the aggregate level, the dependence
of many African economies on commodity exports makes economies vulnerable to
the large price swings in commodities.
4.1.4. Governance
Many private and
government institutions are plagued with governance problems throughout the
continent. This undermines not only the market-based provision of financial
services, but also reform attempts and government interventions aimed at fixing
market failures. These governance challenges are widespread, ranging from many
financial institutions, including banks, microfinance institutions (MFIs), and
cooperatives, to government institutions, including development finance
institutions.
Governance problems
have been at the root of many financial crises on the continent. They also
affect directly the ability of financial institutions and markets to manage
borrower-specific and systemic risks. The governance challenge and agenda
contain a large number of dimensions, from political stability and
accountability over the control of graft to the rule of law.
4.2.
Some
Prescribed Solutions
The above four
characteristics of African finance, call for innovative solutions which can
address these challenges and transform the financial sector of the region. Honohan and
Beck (2007) identify three phenomena that offer such
solutions but also represent
pitfalls. These are globalization, regional integration and technology, which
will be discussed in turn.
4.2.1. Globalization
Integration into
international financial markets has been an important, but controversial aspect
of financial sector policy throughout the world in past decades and even more
so after the recent crisis. While most African countries have opened up their
financial systems to foreign bank entry, capital account restrictions are still
in place in many countries. Capital account liberalization has long been seen
as an important component of the modernist Washington-consensus agenda. Yet,
the crisis experienced in East Asia and other emerging markets in the 1990’s
led to a more cautious approach that focuses more on long-term capital inflows
(foreign direct investment), rather than short-term portfolio flows, and that
imposes additional safety lines on macroeconomic management. This debate has gained
fresh importance during the current attempt of emerging markets to use capital
flow restrictions to counter capital inflows from developed markets as a
consequence of the quantitative easing policies applied in these countries.
4.2.2. Regional
integration
True, regional
integration has been on the agenda of African policy makers since the time when
many countries achieved political independence. And, prima facie, there is an
enormous potential for Africa in overcoming scale diseconomies by coming
together. Not surprisingly, there have been numerous attempts at moving closer
toward such cooperation. However, the results have been limited so far. One
reason for the limited integration has been political; another is
over-ambition, as is obvious from the effort to establish a pan-African
currency union; another still is weak implementation. For this reason, focusing
on smaller, economically and institutionally more homogeneous sub-regions, such
as East Africa, might be more promising than trying to integrate larger
sub-regions containing countries at different levels of financial development
and with different institutional and legal frameworks.
4.2.3. Technology
Technology can help mitigate the
scale-related and the risk-related frictions. Technology can help reduce transaction
costs, especially the fixed costs component. It can help reduce operational
risk as it minimizes the chances of theft and fraud. Financial services via
mobile phones offer African financial systems the chance for a transformational
banking model by leapfrogging conventional banking models and substantially
reducing transaction costs. Moving away from the ‘brick-and-mortar’ model of
banking with high fixed costs toward mobile phone technology, where most of the
costs are variable, can help overcome dis-economies of scale. For instance,
weather insurance built on exogenous indicators can, at low cost, help overcome
information asymmetries between those insured and insurance companies.
Globalization,
regional integration, and technology offer new opportunities, but also
challenges[1].
All three trends will also have an impact on the relative role of the private
and public sectors. There will be more space for private service providers to
deepen and broaden financial systems, while the public sector has to redefine
its role and face new challenges in regulation and supervision.
Globalization,
regional integration, and technology will provide new challenges to financial
sector regulators. Globalization and regional integration will require closer
cooperation between home and host country regulators of cross-border banks in
that home and host countries will be increasingly outside the developed world.
Technology, especially in mobile financial services, will require closer
cooperation between regulators in different sectors, but also a more
substantive, but agile regulatory approach. The changes in globalization and
the new opportunities that technology provides also raise new challenges for
governments.
[1] Details are discussed in Honohan P. and Beck T., (2007); Making
Finance Work for Africa. The International Bank for
Reconstruction and Development / The World Bank, Washington.
[1] Details are discussed in Honohan P. and Beck T., (2007); Making
Finance Work for Africa. The International Bank for
Reconstruction and Development / The World Bank, Washington.
Philip Akpakli K. V.
Supervisor: Helen O. Solomon
London Metropolitan Business School
London Metropolitan University
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