Financial sector reforms and banking stability in the Southern African Development Community (SADC)
No Thumbnail Available
Date
2024-11-29
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
University of Fort Hare
Abstract
The banking sector plays a very critical role to the development of a country. However, in the Southern African Development Community region, in some member countries the banking sector is not well developed. The region continues to encounter major obstacles in the growth of its banking sector, which impedes the rate of economic development, even after implementing several measures to strengthen the banking industry, non-banking sector, and financial markets. Reducing government involvement, opening financial markets, and fortifying financial institutions are all part of the financial sector reforms that has been a key element of developing countries' structural adjustment plans. Despite these reforms, the majority of Southern African countries still have relatively weak financial systems. The literature on financial sector development does also highlight that the reforms which maybe implemented in the sector may also influence the stability of the financial system which may create instability and thwart any growth prospects. The aim of any economy whether developed or developing is to achieve stability, reduce unemployment and sustain economic development through macroeconomic policy which these SADC countries aim to achieve. Given this background, the study examined the effect of financial sector reforms on banking stability in the SADC region for the period from 2013 to 2023 employing the Generalized Method of Moments. The study was underpinned by the financial liberalization theory of McKinnon and Shaw (1973) which shows how financial reforms can result in the development of the banking sector. The findings reveal that proper implementation of financial sector reforms (any changes in banking regulation) results in banking stability. This provides valuable insights for policymakers to design effective strategies for promoting financial sector reforms and banking stability in the SADC region.
Description
Keywords
Southern African Development Community, Finance, Public, Banks and banking, Africa, Southern