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Informal Financial Markets and Financial Intermediation in Four African Countries

ACCESS TO BANKS ACCESS TO FORMAL FINANCE ALTERNATIVE SOURCES OF FINANCE BALANCE SHEET BANK LOANS BANKING ASSETS BANKING SYSTEMS BANKS BUDGET DEFICIT CAPITAL BASE CASH ADVANCES CENTRAL BANK COLLATERAL COMMERCIAL BANKS COMMUNITY BANKS CONTRACT ENFORCEMENT COOPERATIVES CREDIT ALLOCATION CREDIT ASSOCIATIONS CREDIT COOPERATIVES CREDIT PROGRAMS CREDIT UNIONS DEFICIT FINANCING DEMAND FOR CREDIT DEPOSIT DEPOSITS DEVELOPMENT BANKS EARNINGS ESTATE EXCESS DEMAND EXCHANGE RATE FARMERS FINANCE COMPANIES FINANCIAL ARRANGEMENTS FINANCIAL DEVELOPMENT FINANCIAL INSTITUTION FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTOR LIBERALIZATION FINANCIAL SECTOR REFORMS FINANCIAL SYSTEM FINANCIAL SYSTEMS FINANCIAL TRANSACTION FINANCIAL TRANSACTIONS FORMAL BANKS FORMAL FINANCIAL MARKETS HOUSEHOLD SAVINGS HOUSEHOLDS INCOME INFORMAL FINANCE INFORMAL FINANCIAL INSTITUTIONS INFORMAL LENDERS INFORMATION SYSTEMS INSURANCE INTEREST RATE INTEREST RATE CEILINGS INTEREST RATES LACK OF ACCESS LEGAL FRAMEWORK LEGAL SYSTEM LEGISLATION LENDERS LOAN LOANABLE FUNDS LOW-INCOME COUNTRIES MARKET ENTRY MARKET FRAGMENTATION MICROENTERPRISES MONEYLENDERS MONOPOLY OPERATING COSTS OVERHEAD COSTS PORTFOLIO PORTFOLIO PERFORMANCE PRIVATE INVESTMENT PUBLIC BUDGET RECAPITALIZATION REPAYMENT REPAYMENT RATES RETURN RETURNS RISK MANAGEMENT RISK PROFILES SAVINGS SHARE CAPITAL SHORT-TERM LIQUIDITY SMALL BUSINESSES SMALL LOANS SOCIAL NETWORKS STRUCTURAL PROBLEMS SUPERVISORY AUTHORITIES SURPLUS FUNDS TRACK RECORD TRADING TRANSACTION TRANSACTION COSTS WORKING CAPITAL
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Africa
2012-08-13T09:57:09Z | 2012-08-13T09:57:09Z | 1997-01

A study of both informal and formal financial markets in Ghana, Malawi, Nigeria and Tanzania, Financial Market Fragmentation and Reform in Sub-Saharan Africa, shows that informal institutions use specialized methods to serve broad segments of the population that lack access to banks. Although they have responded positively in a liberalized environment, fragmentation into isolated market segments persists. Greater efforts are needed to integrate informal institutions into financial development strategies. The study investigated structural problems such as imperfect information and costly contract enforcement and institutional weaknesses in banking systems and the legal framework that cause wide differences across lenders in the costs of screening, monitoring and enforcing loans. Poor information systems in low-income countries raise the cost to formal institutions of acquiring information on any but the largest clients. In contrast, informal agents utilize personal relationships, social sanctions and various collateral substitutes to serve market segments that remain beyond the reach of formal banks.

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