A financial sector to support development in low-income countries

Designing a financial sector and its’ regulation, in a way that promotes development, provides a particularly challenging area for policy design and research. The policy challenges and research needs are very large, due partly to a major rethinking of the role, scale and structure of a desirable financial sector, as well as its regulation, in light of the major North Atlantic financial crisis. This crisis challenged the view that developed countries’ financial systems, and their regulation should be emulated by developing countries, given that developed countries’ financial systems have been so problematic and so poorly regulated. Furthermore, it is important to understand the implications of the major international policy and analytical rethinking, including on regulation, for low income countries (LICs) in Sub-Saharan Africa (SSA).
This chapter presents two key areas for a policy, as well as a corresponding research agenda for the four case studies on finance and growth in Sub-Saharan Africa 1) the desirable size and structure of the financial sector and 2) new challenges for financial regulation. Discussions in these two areas are important to advance understanding on the links between the financial sector and inclusive as well as sustainable growth, as well as any possible trade-offs.