Financial sector readiness to support economic activities under COVID-19: The case of African continent

Abstract

Organizational readiness for change is considered a critical precursor to the successful implementation of complex changes. Indeed, some suggest that failure to establish sufficient readiness accounts for one-half of all unsuccessful, large-scale organizational change efforts. The African economy and the world at large are at brink of economic depression as result of devastating effect of COVID-19. However, it is equally important to determine the readiness of countries to absorb the economic shock of the pandemic. Using the model by Battese and Coelli (1995), the translog production frontier was adopted to estimate technical efficiency of the financial sector of the continent. The 24 countries selected in Africa were based on the availability of data to cover our variables of interest for period 2000 to 2018. The findings were that financial sector in the continent have performed above average (72%) over the period of study and hence they are slightly ready to support ailing economy. Also lower middle income countries are relatively going to have more problems with pandemic. However, the probability of the continent not plunging into economic depression with the support of the financial sector is 0.42 which is not encouraging. It is recommended that policies to address interest rate margin, liquidity and market concentration should be managed properly to improve technical efficiency of the financial sectors on the continent.