Financial Deepening and Business Creation: A Regional Analysis of Colombia

Cao-Alvira, José J.; Palacios-Chacón, Lorena A.

doi:10.1080/1540496x.2019.1602764

Cited by 9 publications

(4 citation statements)

References 33 publications

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“…Small and medium‐size enterprises (SMEs) have better access to finance in an economy with financial deepening. Several empirical studies have confirmed that financial deepening creates a better economic environment for SMEs by (i) alleviating financing constraints (Beck, 2013), (ii) enabling the creation of new businesses (Cao‐Alvira & Palacios‐Chacón, 2021) and (iii) stimulating different economic opportunities and entrepreneurship activities (Dutta & Meierrieks, 2021; Koloma, 2021; Munemo, 2018). Hence, understanding the roles played by technological innovations in promoting financial deepening, which in turn facilitate SME financing in Africa, will be invaluable for developmental policies.…”

Section: Introductionmentioning

confidence: 99%

The impact of technological innovations on financial deepening: Implications for SME financing in Africa

Sanga

Aziakpono

2022

African Development Review

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This paper examines whether technological innovations such as information and communication technology infrastructure, mobile phone subscriptions, secure internet servers and the number of automated teller machines and bank branches increased financial deepening in 43 African countries for the period 2010-2019. The study employs panel corrected standard errors, fixed effects and quantile regressions for empirical analysis. The results show that technological innovations have a positive and significant influence on financial deepening in Africa in terms of banks' mobilisation of deposits and allocation of credit to enterprises. Furthermore, the technological indicators have a strong and positive effect on higher levels of bank credit to the private sector than lower levels. As for bank deposits, only the number of branches was found to have significant and positive effects at a high level of bank deposits compared with a low level. These results imply that African governments and development partners can leverage ICT developments to increase financial deepening and reinvigorate debt financing, which is the primary funding source for small and medium-size enterprises. | INTRODUCTIONSmall and medium-size enterprises (SMEs) have better access to finance in an economy with financial deepening. Several empirical studies have confirmed that financial deepening creates a better economic environment for SMEs by (i) alleviating financing constraints (Beck, 2013), (ii) enabling the creation of new businesses (Cao-Alvira & Palacios-Chacón, 2021) and (iii) stimulating different economic opportunities and entrepreneurship activities (Dutta & Meierrieks, 2021;Koloma, 2021;Munemo, 2018). Hence, understanding the roles played by technological innovations in promoting financial deepening, which in turn facilitate SME financing in Africa, will be invaluable for developmental policies. SMEs can spur transformative and sustainable economic growth and social development in developing countries if they are fully capitalised and have access to financial services (Moreira, 2016; World Bank, 2020).The recent proliferation of mobile phone services, access to internet and broadband services, and the fourth industrial revolution have increased the use of emerging technologies in financial services (Del Gaudio et al., 2021;Liu et al., 2020;Mhlanga, 2020). These developments in information and communication technology (ICT) have increased the accessibility and affordability of financial services and created an environment ripe for disruptive technologies.

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Section: Introductionmentioning

confidence: 99%

The impact of technological innovations on financial deepening: Implications for SME financing in Africa

Sanga

Aziakpono

2022

African Development Review

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“…Financial deepening has significant effects on attenuating financing constraints for small and medium-sized enterprises (SMEs), enhancing capital and credit-raising services and stimulating entrepreneurship activities in an economy (Beck, 2013;Cao-Alvira and Palacios-Chac on, 2021;Dutta and Meierrieks, 2021;Guiso et al, 2004;King and Levine, 1993). Most private-owned firms, mainly SMEs, depend primarily on debt financing by financial institutions (Berger and Udell, 2006).…”

Section: Introductionmentioning

confidence: 99%

The effect of institutional factors on financial deepening: evidence from 50 African countries

Sanga

Aziakpono

2022

JBSED

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PurposeThis paper investigates the impact of institutional factors on financial deepening and its implications on bank credit in Africa.Design/methodology/approachThe paper employs different panel econometric models to examine the heterogeneity of 50 African countries from 2000 to 2019. The estimators include panel corrected standard errors, system generalized method of moments, quantile and threshold regressions.FindingsThe results show that rule of law, regulatory quality, government effectiveness, voice and accountability, control of corruption and political stability significantly influence financial deepening in Africa. However, government effectiveness has a higher effect on middle- and high-income countries, while other indicators have a high impact on low-income countries. All institutional indicators have stronger effects, almost double, at higher financial depth levels than for countries with lower levels. Government effectiveness and regulatory quality impact financial deepening more for countries with strong institutions than weak ones. Thus, the relationship between institutional qualities and credit provided by banks is non-monotonic.Practical implicationsThe findings suggest that strengthening appropriate institutional factors based on country heterogeneity may effectively stimulate debt financing in Africa, the primary source of financing for small and medium-sized enterprises and entrepreneurs.Originality/valueThe novelty of this paper is that previous studies did not sufficiently scrutinize the heterogeneity of the structure of African economies – i.e. differences in institution, credit and income levels.

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“…Chortareas et al [ 22 ] view an increase in the degree of market competition among financial intermediaries in Latin America as a sign of financial deepening, with tests indicating that such deepening enhances the productivity of financial intermediaries. Some scholars gauge financial deepening by assessing the ratio of a financial indicator to GDP [ [31] , [32] , [33] ]. In measuring rural financial deepening, Zhu et al [ 29 ] employ indicators related to both financial scale and financial efficiency.…”

Section: Data Mechanism and Methodologymentioning

confidence: 99%

Financial deepening does cause income growth of rural residents: Insights from the relationship between government and market in China

Duan,

Zheng

2024

Heliyon

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Financial Deepening and Business Creation: A Regional Analysis of Colombia

Cited by 9 publications

References 33 publications

The impact of technological innovations on financial deepening: Implications for SME financing in Africa

The impact of technological innovations on financial deepening: Implications for SME financing in Africa

The effect of institutional factors on financial deepening: evidence from 50 African countries

Financial deepening does cause income growth of rural residents: Insights from the relationship between government and market in China

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