Abstract:
Persistent poverty and inequality in Southern Africa call for economies to prioritise growth
policies to address these issues. Theory and evidence confirms positive growth effects on
poverty in developing countries. Given the paltry growth trajectory in Southern Africa,
capitalizing on the theoretical underpinnings which allude to the growth spurring capability
of financial development is imperative. This study sought to establish the financial
development and growth nexus in Southern Africa by adopting a panel framework for 13
Southern African countries. Data spanning 26 years (1990 to 2015) for financial
development, growth and other growth linked variables data was collected and analysed.
The findings confirmed that financial development is not significant in explaining the
variation in GDP per capita growth in Southern Africa. However, some growth linked
variables were found to be significant in explaining growth in the region. Understanding the
insignificance of financial development in explaining growth presents an opportunity to
implement financial sector reforms and policies (financial inclusion, financial literacy and
financial intermediation) that can help improve the regionÕs financial development
standard. This study questioned the role of financial development in growing economies in
Southern Africa, hence a redress of the social issues.
