Banking Sector Development in Emerging Markets: A Review of Recent Development in Africa

Abstract

Key to the economic transformation of developing economies is the banking sector developments. The banking sector in Africa has witnessed a steady growth in its core functional areas over the recent decades. This growth has implications on access to finance and stability in the financial system. This study reviews banking sector performance, competition, access to finance and stability in the context of sub-regional and comparator regional analysis with the view to informing and shaping policy directions. The North African economies recorded high levels of financial deepening than the rest of the regions. With the same economic conditions like South Asia, East Asia Pacific and Latin America and Caribbean regions, African’s banking sector depth lags behind these regions. Access to financial institutions is high in Southern African region than the rest of the sub-regions. Again, Africa records very low level of banking sector accessibility compared to its comparator regions. Moreover, the banking system in Africa is characterized by high costs, inefficiency and high margins. The banking system also exhibit high concentration and market power and relative stability than comparator regions. The North African economies exhibit low presence of foreign banks than sub-regional groupings.