Low technological innovation and industrialization in Sub-Saharan Africa: The role of access to finance in the informal sector

What is the role of the business environment in the promoting or restraining growth, technological innovation of firms, and industrialization in an economy? Literature (both past and recent) points to a number of obstacles such as poor regulation and taxation, poor regulation on property rights, inefficient financial markets, which serve as the drawbacks to economic growth and industrialization. This paper studies the role of the financial sector in promoting technological innovation and industrialization in sub-Saharan Africa. We reviewed the factors prompting the fast-expanding informal economy, by giving evidence based reasons to the rapid expansion of the sector. The paper also looked at the role of access to financial services plays in an economy and how that promote firms' innovation, and speeds up industrialization. The paper analysed the reasons behind the low financial inclusion and less access to financial services in the informal economy, the economic powerhouse or backbone of the region. The paper concludes and substantiates the author's view that poor local infrastructure, the nature of knowledge appropriation, mistrust and wrong judgmental decisions as well as the preference of banks to use tangible assets like immovable properties are the causes of low access to financial services in the sub-Saharan informal sector. Thus, this at a larger extent stifles their growth and innovation, and hinders economic development and industrialization thereof. Finally, the author sums up the above to answer the research questions and substantiates his position on measures of addressing the issues of financial inclusion and financial access in the region.

Authors
Publisher
ATLANTIS PRESS
Language
English
Pages
6-11
Status
Published
Volume
240
Year
2019
Keywords
access to finance; financial inclusion; economic growth; sub-Saharan Africa; informal economy; information asymmetry; technological innovation; industrialization
Date of creation
02.11.2020
Date of change
02.11.2020
Short link
https://repository.rudn.ru/en/records/article/record/66341/
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Digilina O.B., Teslenko I.B., Abdullayev V.N.
PROCEEDINGS OF THE 2018 2ND INTERNATIONAL CONFERENCE ON ECONOMIC DEVELOPMENT AND EDUCATION MANAGEMENT (ICEDEM 2018). ATLANTIS PRESS. Vol. 240. 2019. P. 45-49