Abstract
AbstractThis paper presents evidence on the importance of bank‐intermediated trade finance for the intensive margin of African trade, using unique data from 43 African countries. It shows that African trade is underserved by banks. Banks intermediate about 40% of the region's trade – a far lower share than the global average of 80%. It finds that bank‐intermediated finance has a positive and significant effect on the intensive margin of African trade, even after accounting for the impact of domestic credit to the private sector. Estimates from standardised coefficients show that the impact of access to trade finance on trade volume for Africa is large and exceeds that of exchange rate volatility and trade logistics. These results suggest that policies aimed at promoting the region's trade should make access to bank‐intermediated finance a priority.
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