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Financial liberalisation and interest rate risk management in sub-Saharan Africa

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  • Willem Naudé

Abstract

The appropriateness of financial liberalisation in Africa - at least over the short-term - is in doubt. It has been suggested that the credit risks faced by financial institutions will be detrimental to the supply of credit. The contribution of this paper is to point out that financial liberalisation creates a significant interest rate risk. It is argued that this interest rate risk will bias African banks’ activities towards brokerage rather than maturity-transformation functions. Furthermore, it is stressed that the management of interest rate risk is in itself likely to lead to a reduction in the supply of credit. In this regard the usefulness of capital adequacy as defined by the Basle Committee is investigated.

Suggested Citation

  • Willem Naudé, 1996. "Financial liberalisation and interest rate risk management in sub-Saharan Africa," CSAE Working Paper Series 1996-12, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:1996-12
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    References listed on IDEAS

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    1. Falvey, Rod & Kim, Cha Dong, 1992. "Timing and Sequencing Issues in Trade Liberalisation," Economic Journal, Royal Economic Society, vol. 102(413), pages 908-924, July.
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    More about this item

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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