Effects Of Institutional Reforms On Financial Sector Development In Selected East Africa Community Member States

ABSTRACT

In the East African region many institutional reforms has been undertaken to foster

financial sector development. However, the contribution of these reforms to financial

sector development in this region remains unimpressive compared to other developing

economies in Africa. This study seeks to investigate the effects of institutional

reforms on financial sector development in Kenya, Uganda and Tanzania. The

objectives of the study were to: determine the effect of regulatory quality reforms on

financial sector development in Kenya, Uganda and Tanzania; determine the effect of

reforms in accessing information on financial sector development in Kenya Uganda

and Tanzania; and establish the effect of reforms in reducing corruption on the

financial sector development in Kenya, Uganda and Tanzania. Secondary panel data

were collected from electronic secondary sources such as World Bank, International

Monetary Fund, Central Banks, previous surveys, financial reports and regulatory

authorities’ data bases in the respective countries for the periods spanning from 1987

to 2016. An exploratory study design involving econometric analytic techniques was

used to analyze the data collected. In this study, panel data model was used to analyze

panel data and estimate the effects of institutional reforms on financial development

in Kenya, Uganda and Tanzania. The study found that regulatory quality and access to

information have a significant effect on financial sector development in Kenya,

Uganda and Tanzania. In addition the study found out that corruption had a negative

and significant effect on financial sector development in Kenya, Uganda and

Tanzania. The study concluded that regulatory quality and access to information are

important aspects in financial sector development. However corruption slows down

the development of the financial sector. In addition, institutions play a key role in

financial sector development. The study recommends that suitable institutional

changes ought to be started so as to enhance transparency and responsibility of open

establishments, common administration, upholds strict controls and prudential guide for business exercises.