Read Online

Download PDF (EN)

Abstract

This paper examines whether outcome of financial liberalization strategy adopted in the African continent for the past two and half decades promotes new business entrance using data of twenty-two (22) SSA countries from 2006 to 2016. The findings from the random-effect model, following Hausman selection test preference, shows that, financial development via policy of financial liberalization, is not having a uniform effect on growth in entrepreneurship, with interest rate gap, a measure of financial sector efficiency, significantly undermining entrance of new firms at the 1% level, though ratio of broad money/GDP was positive and statistically significant while real interest rate was observed to have a non-significant effect. Interaction of interest rate spread and real interest rate with natural resources, for example, confirms it destabilizing effect, although there was evidence suggesting that, natural resources do not directly undermine growth in entrepreneurship. Other results show that, real GDP, domestic credit to private sector and secondary school enrolment rate, have a significantly positive effect, but government expenditure/ intervention, though positive, was not significant. Inflation was negative and not statistically significant in all models. Corruption and cost of getting electricity (% of income per capita) significantly undermine entrepreneurial development. The study calls for the need to institutionalise the process of financial reforms across SSA countries to reap its growth-inducing effects on economic outcomes, while promoting institutional quality and efficient use of natural resources to achieve a non-declining infusion of SMEs in the African continent.