Aryeetey, ErnestHettige, HemamalaNissanke, MachikoSteel, William2012-08-132012-08-131997-01https://hdl.handle.net/10986/9945A study of both informal and formal financial markets in Ghana, Malawi, Nigeria and Tanzania, Financial Market Fragmentation and Reform in Sub-Saharan Africa, shows that informal institutions use specialized methods to serve broad segments of the population that lack access to banks. Although they have responded positively in a liberalized environment, fragmentation into isolated market segments persists. Greater efforts are needed to integrate informal institutions into financial development strategies. The study investigated structural problems such as imperfect information and costly contract enforcement and institutional weaknesses in banking systems and the legal framework that cause wide differences across lenders in the costs of screening, monitoring and enforcing loans. Poor information systems in low-income countries raise the cost to formal institutions of acquiring information on any but the largest clients. In contrast, informal agents utilize personal relationships, social sanctions and various collateral substitutes to serve market segments that remain beyond the reach of formal banks.CC BY 3.0 IGOACCESS TO BANKSACCESS TO FORMAL FINANCEALTERNATIVE SOURCES OF FINANCEBALANCE SHEETBANK LOANSBANKING ASSETSBANKING SYSTEMSBANKSBUDGET DEFICITCAPITAL BASECASH ADVANCESCENTRAL BANKCOLLATERALCOMMERCIAL BANKSCOMMUNITY BANKSCONTRACT ENFORCEMENTCOOPERATIVESCREDIT ALLOCATIONCREDIT ASSOCIATIONSCREDIT COOPERATIVESCREDIT PROGRAMSCREDIT UNIONSDEFICIT FINANCINGDEMAND FOR CREDITDEPOSITDEPOSITSDEVELOPMENT BANKSEARNINGSESTATEEXCESS DEMANDEXCHANGE RATEFARMERSFINANCE COMPANIESFINANCIAL ARRANGEMENTSFINANCIAL DEVELOPMENTFINANCIAL INSTITUTIONFINANCIAL INTERMEDIARIESFINANCIAL INTERMEDIATIONFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL SECTORFINANCIAL SECTOR LIBERALIZATIONFINANCIAL SECTOR REFORMSFINANCIAL SYSTEMFINANCIAL SYSTEMSFINANCIAL TRANSACTIONFINANCIAL TRANSACTIONSFORMAL BANKSFORMAL FINANCIAL MARKETSHOUSEHOLD SAVINGSHOUSEHOLDSINCOMEINFORMAL FINANCEINFORMAL FINANCIAL INSTITUTIONSINFORMAL LENDERSINFORMATION SYSTEMSINSURANCEINTEREST RATEINTEREST RATE CEILINGSINTEREST RATESLACK OF ACCESSLEGAL FRAMEWORKLEGAL SYSTEMLEGISLATIONLENDERSLOANLOANABLE FUNDSLOW-INCOME COUNTRIESMARKET ENTRYMARKET FRAGMENTATIONMICROENTERPRISESMONEYLENDERSMONOPOLYOPERATING COSTSOVERHEAD COSTSPORTFOLIOPORTFOLIO PERFORMANCEPRIVATE INVESTMENTPUBLIC BUDGETRECAPITALIZATIONREPAYMENTREPAYMENT RATESRETURNRETURNSRISK MANAGEMENTRISK PROFILESSAVINGSSHARE CAPITALSHORT-TERM LIQUIDITYSMALL BUSINESSESSMALL LOANSSOCIAL NETWORKSSTRUCTURAL PROBLEMSSUPERVISORY AUTHORITIESSURPLUS FUNDSTRACK RECORDTRADINGTRANSACTIONTRANSACTION COSTSWORKING CAPITALWorld Bank10.1596/9945