The financial system and socio-economic development among emerging economies of Sub-Saharan Africa

PurposeThis empirical work verifies the effect of the development of the financial sector on socio-economic development of the sub-region of Sub-Saharan Africa.Design/methodology/approachData were compiled from various sources for 40 countries from 2000 to 2020 and were analyzed using the two-step system generalized method of moments estimation technique. Socio-economic development is measured using the Human Development Index in order to focus on living standards and the welfare of individuals and households.FindingsEmpirical results indicate that financial development (efficiency, access and depth) has a significant positive effect on socio-economic development in the sub-region, all other things being equal. Again, the results reveal that improved governance structures positively moderate the nexus between the financial sector and development of economies in the sub-region. Financial stability, trade openness and financial freedom were also found to have a positive impact on living standards and welfare of the people in the sub-region.Originality/valueThe paper examines the nexus between the development of the financial sector and socio-economic development (living standards, welfare and health of the populace), with attention to the possible moderating role that quality of governance could play in the relationship.