Regional Financial Integration And Its Impact On Financial Development: Evidence From SADC Countries


Theme

45


Authors

  • Jonathan Tembo
  • Daniel Makina

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Abstract

The study investigated the impact of regional financial integration on banking sector development with specific focus on the impact of the SADC protocols on trade and finance and investment. A total of 14 countries made up the study sample and the panel cointegration fully modified ordinary least squares model alongside the GMM were used to estimate the nature of impact. Study findings showed regional integration through the protocol on trade had a positive and significant impact on size and efficiency of the banking sector using the FMOLS estimator. GMM estimations for the same variables were largely insignificant. Study findings also pointed to an improvement in global financial integration indicators as a result of the trade protocol, which in turn also contributed to an increase in the level of monetization of regional financial markets. The finance and investment protocol had a positive and significant impact on private sector credit for both estimators and largely insignificant relationship with broad money. The impact of the finance protocol was not significant enough to be detected in global integration measures, implying their implementation may not have significantly improved global integration for SADC countries. The study also uncovered the complimentary relationship between institutional quality and social capital in the financial development process.

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