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The Impact of Derivatives Use on Systemic Risk of Africa’s Banking System

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  • Audrey Nguema Bekale
  • Imhotep Paul Alagidede
  • Jones Odei-Mensah

Abstract

This paper contributes to the debate about Africa’s financial stability by focusing on the prevalence of systemic risk in 40 listed derivatives user-banks over 2011–2017, employing the systemic risk index (SRI), and subsequently exploring how it links to the continent’s financial market development. The systemic risk buildup within the industry is mainly depicted as an unstable, diluted, and possibly depleting process. Gloomy predictions persist in the subsequent attempts to uncover plausible causes of systemic risk formation. Mainly, conventional defining factors for risk exhibit irrelevance toward systemic risk development, as threats to financial stability remain confined within the industry, supported by a lack of diversification in financial services. The investigated markets may be individually subject to internal vulnerabilities that could be exacerbated by financial shocks, feedback effects, and the likelihood of contagion and failure among financial institutions.

Suggested Citation

  • Audrey Nguema Bekale & Imhotep Paul Alagidede & Jones Odei-Mensah, 2024. "The Impact of Derivatives Use on Systemic Risk of Africa’s Banking System," Journal of African Business, Taylor & Francis Journals, vol. 25(3), pages 486-508, July.
    • Handle: RePEc:taf:wjabxx:v:25:y:2024:i:3:p:486-508
    DOI: 10.1080/15228916.2023.2185431
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