Financial intermediation in Africa: new perspectives on technology as a catalyst for financial informalisation

Purpose The purpose of this study is to examine how technology (proxied by technology goods, internet, mobile devices, internet servers, and fixed telephone) can catalyse financial informalisation in enhancing financial institutions' ability to perform their intermediation role effectively. Design/methodology/approach The study used panel data from 43 African countries spanning the years 2004 to 2023. The empirical approach is the Instrumental Variable-system Generalised Method of Moments (IV-GMM). Findings The findings show that how technology catalysed informality to determine financial intermediation is mixed and depends on the specific proxy of technology and financial institution. For instance, in the formal financial sector, internet usage catalyses informality in promoting efforts in financial intermediation. Yet, in the same sector, technological goods interacting with informality constrain intermediation efforts. In the banking industry, internet usage interacts with informality to dampen banks’ intermediation efforts. However, technological goods catalysing informality boost banks’ intermediation efforts. This implies there is a disjoint between the banking industry and the overall financial system in Africa, in terms of technology catalysing informality. Research limitations/implications The scope of this study is limited to the context of 43 African economies. The content of this study is limited to the nexus between financial intermediation, technology and informal financial activities. Therefore, future researchers can extend this scope to cover other developing regions like Asia. Practical implications Policymakers need to advocate for internet access to boost inclusive finance, while supporting the banking industry to adapt and compete strategically with FinTech companies. Bankers must strategically adopt digitisation and form alliances with fintech companies, rather than discouraging financial disintermediation. The findings suggest the need for manufacturing technological goods domestically in Africa to mitigate the adverse externalities of imported goods. Originality/value The originality of this study is the analysis of how technology (proxy by internet servers, technology goods, mobile technology) catalyses financial informality to foster formal financial intermediation activities in Africa.