Features of Financing Development in Sub-Saharan African Countries

The aim of this paper is to investigate the effects of access to finance and its related activities on innovative growth and development in Sub-Saharan Africa. It was found that the growth effect of finance is sensitive to the choice of proxy. Contrary to studies by Levine (2005), Akinlo and Olufisayo (2009), and other, negative correlations, although surprising, were found between economic growth and all the following control variables: domestic credits to private sector; domestic credit and credits provided other than the private sector; central government credits; bank credit to private sector; and inflation, while broad money stock to GDP ratio as well as FDI are growth-inducing. That explains that a high growth in Sub-Saharan Africa will lead a decrease in the above variables, which seems unrealistic. As it is expected, especially that the credit to the private sector as ratios to GDP and total domestic credit should be conducive for economic growth and development through their innovative activities. The proxies created from major component analysis proved the sensitivity of the effect to the choice of proxy. Thus, these findings suggest that the good or bad effects of access to finance on growth largely depend on the indicator used to proxy for the role played by finance in the economy.