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High-Speed Internet, Financial Technology and Banking in Africa

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Abstract: This paper provides empirical evidence on the effect of high-speed internet on financial technology and banking in Africa. Our test combines data on 551 banks and 28,171 firms with the staggered arrival of bre-optic submarine cables in Africa. High-speed internet promoted private-sector lending by banks, and credit and sales by firms. These results are consistent with an extensive adoption of financial technologies, like real-time gross settlement systems (RTGS), lowering transaction costs in African interbank markets. We find that liquidity management considerably changed for banks being weak interbank users prior to high-speed internet. In fact, such banks lowered their internal liquidity hoarding by 10 , increased interbank transactions by 40 and expanded lending by 37 . Analogously, firms in countries with weak pre-existing interbank markets presented stronger effects at the cable arrival. These results are consistent with high-speed internet promoting financial technology adoption, liquidity and credit.

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