Book Description

The basic objective of this paper is to study the financial sector reform policies during the reform period in Zambia Over the period financial sector reforms have been undertaken in Zambia. It traces the relationship between financial deepening and economic growth. This empirical study examined financial deepening and economic development in Zambia between 1986 and 2012. The central focus is that a high level of financial deepening is a necessary condition for accelerating growth in an economy. This is because of the central role of the financial system in mobilizing savings and allocating same for the development process. The study made use of secondary data, sourced for a period of 25 years. The study is based on theoretical underpinnings of McKinnon-Shaw model. Analytical framework was used in the analysis. At the end of the study, we found that financial deepening index is low in Zambia over the years. We also found that the nine explanatory variables, as a whole were useful and had a statistical relationship with financial deepening. But four of the variables; lending rates, financial savings ratio, cheques/GDP ratio and the deposit money banks/GDP ratio had a significant relationship with financial deepening. We conclude that: the financial system has not sustained an effective financial intermediation, especially credit allocation and a high level of monetization of the economy. Thus the regulatory framework should be restructured to ensure good risk management, corporate governance and stemming systemic crisis in the system.