INFORMAL FINANCIAL-MARKETS UNDER LIBERALIZATION IN 4 AFRICAN COUNTRIES

This paper presents survey evidence from four countries on how informa l financial agents serve market niches that banks cannot readily reach . Their methodologies are effective in keeping down transaction costs and default risk relative to banks, although informal agents exercise monopoly power in dualistic markets. Liberalization of repressive fina ncial policies has had little effect on formal financial deepening, wh ile informal finance has continued to grow. The paper concludes that i nformal financial institutions are an important vehicle for mobilizing household savings and financing small businesses, and it recommends t hat informal finance be better integrated into financial development s trategies. (C) 1997 Elsevier Science Ltd.