Banking Competition and Industrialization: Evidence from Some African Countries

The relationship between bank competition and industrialization remains controversial and scarce in studies related to African countries. Using a sample of 26 African countries from 1996 to 2017, the objective of this paper is to analyze the effect of banking competition measured by non-structural measures (Lerner index and Boone indicator) on industrialization. Using the GMM, we obtained two different results. When measured by the Lerner index, competition evolves in the same direction as industrialization while the opposite effect is observed when using the Boone index. Following these results, we found that the relationship between bank competition and industrialization is non-linear. Bank competition should be encouraged but it should also be regulated so as not to become a brake on industrialization.