Original Research

Non-bank financial institutions and economic growth: Evidence from Africa’s three largest economies

Ronald Rateiwa, Meshach J. Aziakpono
South African Journal of Economic and Management Sciences | Vol 20, No 1 | a1545 | DOI: https://doi.org/10.4102/sajems.v20i1.1545 | © 2017 Ronald Rateiwa, Meshach J. Aziakpono | This work is licensed under CC Attribution 4.0
Submitted: 08 February 2016 | Published: 15 May 2017

About the author(s)

Ronald Rateiwa, Univeristy of Stellenbosch Business School, Univeristy of Stellenbosch, South Africa; The Competition Commission of South Africa, Pretoria, South Africa
Meshach J. Aziakpono, University of Stellenbosch Business School, South Africa


Background: In order for the post-2015 world development agenda – termed the sustainable development goals (SDGs) – to succeed, there is a pronounced need to ensure that available resources are used more effectively and additional financing is accessed from the private sector. Given that traditional bank lending has slowed down, the development of non-bank financing has become imperative. To this end, this article intends to empirically test the role of non-bank financial institutions (NBFIs) in stimulating economic growth.

Aim: The aim of this article is to empirically test the existence of a long-run equilibrium relationship between economic growth and the development of NBFIs, and the causality thereof.

Setting: The empirical assessment uses time-series data from Africa’s three largest economies, namely, Egypt, Nigeria and South Africa, over the period 1971–2013.

Methods: This article uses the Johansen cointegration and vector error correction model within a country-specific setting.

Results: The results showed that the long-run relationship between NBFI development and economic growth is relatively stronger in Egypt and South Africa, than in Nigeria. Evidence in respect of Nigeria shows that such a relationship is weak. The nature of the relationship between NBFI development and economic growth in Egypt is positive and significant, and predominantly bidirectional. This suggests that a virtuous relationship between NBFIs and economic growth exists in Egypt. In South Africa, the relationship is positive and significant and predominantly runs from NBFI development to economic growth, implying a supply-leading phenomenon. In Nigeria, the results are weak and mixed.

Conclusion: The study concludes that in countries with more developed financial systems, the role of NBFIs and their importance to the economic growth process are more pronounced. Thus, there is need for developing policies targeted at developing the NBFI sector, given their potential to contribute to economic growth.


non-bank financial institutions; economic growth; Egypt; Nigeria; South Africa


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