8 Jun 2016
New major research project to look at inclusive finance in Africa
It is well known that financial institutions and markets can help disseminate the flow of information about resource availability, especially the required financial resources for supporting economic growth. However, it is much less clear how financial development can be inclusive – some people and enterprises are unable to fully participate in the financial sector; globally, some countries may not access international capital markets. While new technology such as mobile money transfer systems have strengthened financial inclusion, gaps in access to finance as well as gaps in the development of financial systems seem to be getting wider following the 2007-09 global financial crisis.
Overall, the current consensus is that there is urgent need for research on inclusive finance and its potential contribution to lifting low-income countries to the level of medium-income peers.
Led by Professor Victor Murinde at the University of Birmingham, a consortium of partners, including Loughborough University's School of Business and Economics, will collaborate on a £1.99M four-year research project on inclusive finance, funded by ESRC:
- University of Birmingham
- SOAS, University of London
- Institute of Development Studies, University of Sussex
- School of Business and Economics, Loughborough University
- Overseas Development Institute
- University of Nottingham
- CIBIF, Faculty of Economics and Business, University of Groningen, Netherlands
- Université Laval in Québec, Canada
- Columbia University, United States
- University of Ghana-Legon, Africa
- African Economic Research Consortium [AERC]
The research addresses three core questions:
- How can institutional frameworks support inclusive financial development?
- What role do private and public capital flows play in domestic financial inclusion in Africa?
- How can private and public institutions in Africa be a catalyst and channel for technological diffusion and financial inclusion?
Professor Victor Murinde said:
The project will deliver rigorous, high-quality research to support financial inclusion policies; develop innovative financial products in collaboration with households, banks, and the private sector; involve collaborative research to enhance methodologies and data for the promotion of inclusive finance in Africa; and engage with policy-makers to provide research-based advice on financial inclusion.
Loughborough University academics Christopher Green, Professor of Economics and Finance, and Ahmad Ahmad, Lecturer in Macroeconomics, will be leading two of the research themes.
The first theme involves studies of the modalities through which technical innovations may improve access to financial services in Africa, concentrating in particular on developments and possibilities in ‘mobile money’. The use of mobile phones in financial services was pioneered largely in Kenya, and the new research will investigate how mobile money is used in West Africa in comparison with East Africa, and the ways in which mobile phones and related technologies offer alternatives to conventional banking in enabling households to gain access to financial services.
Dr Ahmad said of the project:
The explosive growth in the use of mobile phones to access financial services has been an exciting development in certain African countries. This project will aim to shed light on the wider possibilities for using mobile phones and related technologies to promote financial inclusion throughout Africa.
The second research theme concerns bank integration in East Africa. There is ongoing financial integration among East African countries which is generally recognised to help promote economic growth in the region. However, policy makers are increasingly concerned about the issue of how whether integration can fuel contagion of financial crises as funds flow through the banking systems and across borders. Researchers will empirically examine the degree to which the banking systems in East African countries have become interconnected, how far interbank networks contribute to the transmission of contagion in this region, and consider possible policy responses.
Professor Green said:
Contagion is an established concern for financial systems in the major industrial countries, but financial integration is only just beginning in Africa.
This research will aim to document the extent of financial integration in East Africa and draw out lessons so that Africa may avoid some of the problems faced elsewhere, especially during and after the 2007-08 financial crisis.
For further information about the project please follow the updates online www.birmingham.ac.uk/business
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