Financial innovation, corruption, and economic growth: analysis of Sub-Saharan African countries

Abstract

Financial innovation allows the expansion of financing, facilitates domestic and international commercial transactions, and reduces bureaucracy for financial institutions in customer satisfaction. We aim to examine the determinants of financial innovation and to verify whether financial innovation positively impacts economic growth, despite the prevalence of corruption in the Sub-Saharan Africa region. Results show that the determinants of financial innovation in Sub-Saharan African countries are competitiveness and the crisis in the banking sector, the need to extend the portfolio of deposits and bank loans (financial inclusion), and increased internet access for households and investment. Similarly, corruption prevents the transmission of the positive effects of the financial system on economic growth, and reductions in corruption boost economic growth, so it will be important for policymakers to bear in mind that without the reduction and control of corruption in developing countries, financial innovation does not produce major advantages concerning the economic growth of African countries.