Financial Sector Development Indicators and Economic Growth in Cameroon and South Africa

This study seeks to identify, compare and appreciate salient differences in the financial sector development and economic growth experiences of Cameroon and South Africa. A comparative study is often conducted in the early stages of development of a branch of science in order to help research to progress from the initial level of exploratory case studies to a more advanced level of general model invariance, such as causality. Furthermore, a comparative study can also help in understanding the root cause of the development and/or weakness of one system (economy). A comparison between the financial sectors of Cameroon and South Africa will help to identify whether or not the level and structure of a financial sector can explain differences in terms of the effects of the latter on economic growth. The paper first compares the economic growth experiences of Cameroon and South Africa and examines the development of their financial sector. This is to assist in understanding their economic situations, in order to acknowledge the experiences of the two countries, which may explain the nature of the development of their financial sectors. The paper then analyzes the further development of their financial sectors using various indicators of financial deepening. This is to evaluate how all the policies implemented in order to restore the economic situation in these countries have impacted on their financial sector, either in terms of the number of players (financial widening), or in terms of their efficiency (financial deepening). Implications and conclusion are then included. It has been suggested that in Cameroon, during the pre-reform period, the country as well as the financial sector, excelled the most, partly due to the discovery of oil in 1978. However, the mid 1980s economic shock experiences of Cameroon significantly affected the financial sector. Subsequent financial sector development policies of Cameroon have failed to improve the economic situation. In the post-reform period, the banking sector was unable to efficiently collect savings and allocate these to the economy, possibly because of the loss of confidence in the banking sector although few efforts were made to attract savings from the economy. Furthermore, real interest rate, which reflects the real cost of funds to the borrower and the real yield to the lender, was almost negative throughout the period under review, and did not attract savings, even when it was positive. For South Africa, throughout the period under review, there has been a trend of an increase in almost all the indicators of the financial sector development selected. Savings have been better mobilised and effectively allocated to the economy and the financial sector has done well since the liberalisation of the sector.     

An Econometric Analysis of the Relationship Between Millennium Development Goals,Economic Growth and Financial Development in South Africa

The relationship between financial development, economic growth and millennium development goals are unsettled in the literature. Using four indicators of financial development, this paper studies the link between the three variables in South Africa. In general, per capita income improves per capita spending on education in the short run. However, total domestic credit to GDP ratio decreases spending on education. There are highly significant long run relationships among the variables. Improving access to private sector credit and increasing per capita incomes are associated with improvement in health outcomes in South Africa. There are no short run nor long run relationships between household spending on clothes, economic growth and financial sector development. Improved private sector credit also improves household spending on food. In general, there are long run relationships between per capita spending on food, per capita income and financial sector development.