ICT, Financial Sector Development and Financial Access
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ICT, Financial Sector Development and Financial Access Simplice A. Asongu 1,2 & Jacinta C. Nwachukwu 3
Received: 4 November 2016 / Accepted: 9 March 2017 # Springer Science+Business Media New York 2017
Abstract This study assesses the role of ICT (internet and mobile phone penetration) in complementing financial sector development (financial formalization and informalization) for financial access. The empirical evidence is based on generalized method of moments with 53 African countries for the period 2004– 2011. The following findings are established from linkages between ICT, financial sector development and financial activity. First, the interaction between ICT and financial formalization (informalization) decreases (increases) financial activity. Second, with regard to net effects, the expected signs are established for the most part. In spite of the negative marginal effects from financial informalization, the overall net effects are positive. Third, the potentially appealing interaction between ICT and informalization produces positive thresholds that are within ranges. Policy implications are discussed in three main strands. They include implications for (i) mobile/internet banking, (ii) a quiet life and (iii) ICT in reducing information asymmetry and surplus liquidity. Keywords Allocation efficiency . Financial sector development . ICT JEL Classification G20 . G29 . L96 . O40 . O55
* Simplice A. Asongu [email protected] Jacinta C. Nwachukwu [email protected]
1
African Governance and Development Institute, P.O. Box 8413, Yaoundé, Cameroon
2
Department of Economics, University of South Africa, P. O. Box 392, UNISA, Pretoria 0003, South Africa
3
School of Economics, Finance and Accounting, Faculty of Business and Law, Coventry University, Priory Street, Coventry CV1 5FB, UK
J Knowl Econ
Introduction Positioning of an inquiry on linkages between information and communication technology (ICT), financial sector development and financial access in Africa has a fourfold motivation, namely (i) the scope of ICT on that continent, (ii) need for alternative sources of finance for Africa’s growing investment needs, (iii) rising concerns about surplus liquidity and gaps in the measurement of financial development and (iv) scarce literature on financial sector development. First, there is considerable scope for the development of ICT in Africa compared to other regions of the world. As documented in recent ICT literature (Penard et al. 2012; Asongu 2015a), the continent is experiencing an uneven development in mobile phone and internet penetration. According to the narrative, whereas as of 2010 mobile phone and internet penetrations had reached saturation levels in developed economies, their development in Africa was low and asymmetric with 41% (9.6%) of mobile phone penetration (internet penetration). The studies are consistent with the view that the ICT market in Africa represents considerable opportunities for doing business because high-end markets in Asia, North America and Europe ar
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