The impact of financial integration on financing innovative development in Sub-Saharan Africa
This article reviews and analyzes the role of access to finance on financing innovation development in developing countries, for that matter Sub-Saharan region. The data collected from the World Development Indicators database of the World Bank cover the period of the 'New Economy', and were adequately tested to ensure it satisfies the research objective. Thus, the data compiled was examined, prior to the application of exploratory factor and regression analyses, in order to ensure that they were amenable to the use of these techniques and relevance to this study. XLSTAT software was used to perform correlation and regression analyses on independent variables used as proxy variables for innovation development (indigenous promotion of innovation growth through funds for R&D and human capital development) such as total domestic credit, domestic credit to private sector; domestic credit to bank credit to private sector; expenditure on education as percentage of GDP; and FDI, whilst GDP per capita growth was used in this study the dependent variable. The research results show that overall domestic credit, domestic credit to private sector, bank credit to private sector and FDI all show a positive influence economic growth, with domestic credit to private sector being the most influential. However, a negative correlation was found between economic growth and the expenditure on education, a special proxy variable for innovation (human capital development and R&D). This explains, surprisingly, that a higher spending on this variable will lead a decrease in growth in Sub-Saharan Africa, which seems unrealistic. It was anticipated that all these variables especially overall domestic credit, credit to private sector including bank credits must have significant positive coefficients. Although, the results of this study seem a bit worrying, however, the overall of goodness-of-fit measures: R-value (0.57) and lower P-value (0.047) prove the reliability of the model, hence must be accepted as such. The results indicate that the growth effect of financial development is sensitive to the choice of proxy used. Like either using the private sector credit to GDP ratio or the private sector credit as a ratio to total credit, we found positive and significant effect of financial development on innovation induced growth. This study provides a guideline in future research for policymakers, economists and business people for better assessment of how a broader financial inclusion could facilitate innovation growth and economic development of Sub-Saharan African countries.