Abstract
The analysis of the competitiveness of the banking sector, a firm’s ability to access financing, and economic growth in the Southern African Development Community (SADC) has been limited. This study investigates the long-run and short-run causality relationship between the competitiveness of the banking sector, a firm’s ability to access financing, and economic growth in the SADC countries. The empirical analysis was conducted by employing the Panel Vector Error Correction Model (VECM). The secondary data were collected from the World Bank Development Indicator (WDI) in a panel data set of 12 SADC* countries with total time series data of 23 years (1997-2019). The empirical study found evidence of the long-run causality from the competitiveness of the banking sector and access to finance to economic growth in the SADC countries. However, no short-run causality was found among the variables. The results support the market power hypothesis, which postulates that high competition positively affects a firm’s ability to access financing, which consequently increases economic growth. The findings of this study suggest that policy makers need to prioritise policies that enhance the competitiveness of the banking sector in the SADC region. This can have a positive effect on a firm’s ability to access financing and consequently increase economic growth.
Keywords: SADC, competition, economic growth, financial access, causality, and panel VECM
*12 SADC excludes Democratic Republic of Congo (DRC), Zimbabwe and Malawi- due to data availability.