The Persistence of Historical Institutional Determinants of Financial System Development in Africa: Colonial Vs. Precolonial Effects

Chukwunonye O. Emenalo (Lagos Business School, Pan-Atlantic University)

Abstract: This paper seeks to answer the following question: how persistent are the effects of colonial and precolonial historical institutional determinants of financial system development in African former European colonies from their independence to present day? The colonial factors analyzed are legal origins and disease endowment while the precolonial factors investigated are slave trade and political centralization. Based on empirical analysis of financial system development data from 1960 to 2015, I find that only slave trade, a precolonial historical institutional factor that is a determinant of mistrust and ethnic fractionalization in Africa, had a statistically significant effect and in the hypothesized direction in some decades out of the almost six decades studied. The other variables did not have robust effects over the 55 years under study. I discuss theoretical and policy implications of these findings.