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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Positive Interest Rates: Financial Deepening and the Mobilisation of Savings in Africa
Author:Ikhide, Sylvanus I.ISNI
Year:1993
Periodical:Development Policy Review
Volume:11
Issue:4
Period:December
Pages:367-382
Language:English
Geographic terms:Subsaharan Africa
Africa
Subjects:savings
interest rates
Economics and Trade
External link:https://doi.org/10.1111/j.1467-7679.1993.tb00047.x
Abstract:This article provides empirical evidence in support of the use of positive real rates of interest to enhance financial deepening and hence mobilize financial savings in a sample of 17 African countries. By using the OLS (Ordinary Least Squares) method of estimation, the hypothesized relationship between real deposit rates and financial deepening was tested. The major finding is that the real rate of interest is quite important in explaining variations in financial savings. In a majority of countries, the results support the hypothesized positive relationship between real interest rates and financial deepening. This finding underscores the need for the provision of adequate banking facilities. The results also provide evidence to support the fact that positive real interest rates do enhance the efficiency of investment. Given these results, it is recommended that a policy of positive interest rates could be pursued to mobilize savings in Africa. Bibliogr., notes.
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