Does Financial Development Explain the Industrialization of Great Lakes Countries? A Multidimensional Approach

Abstract

Purpose: The objective of this study is to analyze the effects of financial development on the industrialization of countries in the Great Lakes region. To this effect, we use data from secondary sources mainly from the World Bank databases covering the period 1985 to 2020. Methodology: The methodology was based on the Feasible Generalized Least Squares and Autoregressive Distributed Lag model as an estimation technique. Results: The results show that financial development through domestic credit granted to economies, negatively influences the industrialization of Great Lakes countries. This effect is true for the quality of institutional and the total rent of natural resources. In addition, the rate of trade openness, human capital, and private investment have a positive and significant effect on the industrial process of the countries of the region under examination. Unique Contribution to Theory, Policy and Practice: For the financial system to be sufficiently robust and contribute to the process of industrialisation in the region, it is necessary to strengthen positive financial sector reforms appropriately, improve the business climate to enhance private sector participation in industrial transformation, strengthen the accountability and effectiveness of governments in the region and, most importantly, mitigate the effects of war by ensuring long-term political stability to promote better governance structures for industrial development.