Ernest Aryeetey

Informal financial markets under liberalization in four African countries

Abstract This paper presents survey evidence from four countries on how informal financial agents serve market niches that banks cannot readily reach. Their methodologies are effective in keeping down transaction costs and default risk relative to banks, although informal agents exercise monopoly power in dualistic markets. Liberalization of repressive financial policies has had little effect on formal financial deepening, while informal finance has continued to grow. The paper concludes that informal financial institutions are an important vehicle for mobilizing household savings and financing small businesses, and it recommends that informal finance be better integrated into financial development strategies.

Institutional Analysis of Financial Market Fragmentation in Sub-Saharan Africa: A Risk-Cost Configuration Approach

Financial markets in Sub-Saharan Africa (SSA) have played a very limited role in the mobilization of resources to facilitate growth-enhancing private investments. Despite various efforts through financial sector reforms, financial markets remain largely fragmented, with substantial gaps in the financing of economic activities by private agents. Based on findings from surveys of formal and informal financial institutions and their clients in Ghana, Malawi, Nigeria and Tanzania,1 we argued elsewhere (Aryeetey et al. 1997; Nissanke and Aryeetey 1998) that the continuous poor performance of financial systems can be partly explained by the high degree of financial market fragmentation.

Private investment under uncertainty in Ghana

Abstract Ghanas Economic Recovery Program saw considerable growth of the economy during 1985–1991. This commendable performance slackened after 1992, a fact which is attributable to poor private investment response following reform. This article shows that the poor growth in private investment may be attributed to the perception of uncertainty in the political and economic environment since 1982. The uncertainty is derived from the low credibility of government as it has been unable to assure investors that earlier decisions that showed a bias against private wealth will not be repeated. Economic incentives arising from reforms do not provide guarantees against poor credibility.

The Changing Regulatory Environment and its Implications for the Performance of Small- and Medium-sized Enterprises in Ghana

Regulating Development examines the impact that regulation – good or bad – can have on the development of poorer societies. It opens with a succinct review of critical issues, including the implications of the spread of intellectual property rights legislation and the role of the World Trade Organisation (WTO).