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Effect of Financial Intermediation on Economic Growth in Cameroon

Author

Listed:
  • Moutie Giscard
  • Ngouhouo Ibrahim
  • Kamajou François

Abstract

Cameroonian economic policy from 1988 restructured the financial sector towards a greater Financial Intermediation (FI). This article seeks to understand the influence of FI on economic growth in Cameroon. This principal objective is split into two specific objectives: (1) to determine the impact of FI on economic growth and (2) to identify the nature of the link between FI and Economic Growth in Cameroon. In order to attain this principal objective, we use secondary data for the period 1977 to 2006. The impact of FI on growth is realized by a multiple linear regression and the relationship between FI components and economic growth measured by GNP per capita is modeled by a Vector Auto Regression model. The study shows that FI has a positive and non-significant impact on economic growth in Cameroon through private credit, monetary mass, intermediation margin as well as bank restructuring. It also shows no causal effect of FI on growth and vice versa. This could be explained by the restructuring of the banking system, bank over liquidity, MFE’s instability and poor growth environment. Thus banks and Micro Finance Establishments (MFE) might consolidate their management system in order to ensure their credibility as well as their continuity. The Banking Commission of Central Africa (COBAC) and the Cameroonian government should intensify the process of the stabilization of the micro finance sector and create a credible financial market.

Suggested Citation

  • Moutie Giscard & Ngouhouo Ibrahim & Kamajou François, 2015. "Effect of Financial Intermediation on Economic Growth in Cameroon," International Journal of Management Sciences, Research Academy of Social Sciences, vol. 5(9), pages 639-649.
    • Handle: RePEc:rss:jnljms:v5i9p4
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    References listed on IDEAS

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