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The development of financial markets in Africa: trends, challenges and prospects

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  • Misheck Mutize
  • Ejigayhu Tefera
  • McBride Nkhalamba

Abstract

This paper explores trends and challenges in the development of African financial markets over the past two decades. Access to capital is essential for government to finance its budget and the performance of government policies is in part evaluated through how financial asset prices respond to the policy choices. Erratic security issuance, thin trading, low turnover ratios and lack of market depth has characterised African financial markets as inefficient. Applying a descriptive research model on key data from international think tanks to observe the behaviour of financial markets data in African countries, the study finds that African financial markets still face the traditional challenge of lack of market depth relative to other regions in other continents due to their limit size and very low market capitalisation. This is a key factor holding back the ability of investors to exploit expansion opportunities. This paper recommends that, part of the solution to challenges faced by African financial markets is for governments to assist in set-up electronic trading platforms, improve trading and settlement infrastructure.

Suggested Citation

  • Misheck Mutize & Ejigayhu Tefera & McBride Nkhalamba, 2020. "The development of financial markets in Africa: trends, challenges and prospects," Journal of Economics and Behavioral Studies, AMH International, vol. 12(1), pages 46-54.
    • Handle: RePEc:rnd:arjebs:v:12:y:2020:i:1:p:46-54
    DOI: 10.22610/jebs.v12i1(J).2991
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    References listed on IDEAS

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    3. Bernhard,William & Leblang,David, 2006. "Democratic Processes and Financial Markets," Cambridge Books, Cambridge University Press, number 9780521861229, January.
    4. Flore-Anne Messy & Chiara Monticone, 2012. "The Status of Financial Education in Africa," OECD Working Papers on Finance, Insurance and Private Pensions 25, OECD Publishing.
    5. Bernhard,William & Leblang,David, 2006. "Democratic Processes and Financial Markets," Cambridge Books, Cambridge University Press, number 9780521678384, January.
    6. Alice Evans, 2019. "Overcoming the Global Despondency Trap: Strengthening Corporate Accountability in Supply Chains," CID Working Papers 367, Center for International Development at Harvard University.
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