Financial Intermediation and Economic Growth in Cameroon

Abstract

Cameroonian economic policy from 1988 restructured the financial sector towards a greater Financial Intermediation (FI). This article seeks to understand the nature of the link between FI and Economic Growth. In order to acheive this main objective, the relationship between FI components and economic growth measured by GNP per capita is modeled by a Vector Auto Regression model using secondary data for the period 1977 to 2006. The study shows no causal effect between FI and growth and vice versa. This could be explained by the restructuring of the banking system, bank overliquidity, Micro Finance Establishment’s instability and the poor growth environment. Thus banks and Micro Finance Establishments (MFE) might consolidate their management system in order to ensure their credibility as well as their continuity. The Banking Commission of Central Africa (COBAC) and the Cameroonian government should intensify the process of the stabilization of the micro finance sector and create a credible financial market.