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Bank profits are high in Sub-Saharan Africa (SSA) compared to other regions. This paper uses a sample of 389 banks in 41 SSA countries to study the determinants of bank profitability. We find that apart from credit risk, higher returns on assets are associated with larger bank size, activity diversification, and private ownership. Bank returns are affected by macroeconomic variables, suggesting that macroeconomic policies that promote low inflation and stable output growth does boost credit expansion. The results also indicate moderate persistence in profitability. Causation in the Granger sense from returns on assets to capital occurs with a considerable lag, implying that high returns are not immediately retained in the form of equity increases. Thus, the paper gives some support to a policy of imposing higher capital requirements in the region in order to strengthen financial stability.

Finance --- Business & Economics --- Banking --- Bank profits --- Banks and banking --- Bank earnings --- Agricultural banks --- Banking industry --- Commercial banks --- Depository institutions --- Profit --- Financial institutions --- Money --- Banks and Banking --- Finance: General --- Investments: Stocks --- Macroeconomics --- Inflation --- Financial Markets and the Macroeconomy --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- General Financial Markets: Government Policy and Regulation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Personal Income, Wealth, and Their Distributions --- Price Level --- Deflation --- Financial services law & regulation --- Investment & securities --- Bank soundness --- Credit risk --- Stocks --- Personal income --- Financial sector policy and analysis --- Financial regulation and supervision --- National accounts --- Prices --- Financial risk management --- Income --- United States

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This paper investigates the role of creditor rights and information sharing in explaining why some financial markets in sub-Saharan Africa have remained shallow. The paper finds that while financial liberalization and macroeconomic stability promote financial deepening, they are not enough. For countries with similar financial liberalization efforts, those with stronger legal institutions and information sharing have deeper financial development. This result is consistent with a growing body of research for other regions of the world. The main policy implications are that (1) creditor rights legislation should be reinforced, the law reformed, and efficient property registries established; and (2) governments should sponsor credit bureaus where private bureaus might not be commercially viable.

Finance: General --- Money and Monetary Policy --- Public Finance --- Industries: Financial Services --- Financial Markets and the Macroeconomy --- Taxation, Subsidies, and Revenue: General --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: General --- Finance --- Public finance & taxation --- Monetary economics --- Financial sector development --- Legal support in revenue administration --- Credit --- Credit bureaus --- Financial sector --- Financial services industry --- Revenue --- Credit ratings --- South Africa --- Africa, Sub-Saharan --- Economic policy.

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