Financial Development and Economic Development in Africa: The Moderating Role of Institutional Quality

Financial development is widely regarded as a driver of economic development in Africa, yet the conditioning role of institutional quality has not been systematically synthesised. This systematic review, conducted in accordance with PRISMA 2020 guidelines, examines 94 peer-reviewed studies on the relationship between financial development, institutional quality, and economic development in African and comparable emerging-market contexts. Ninety-two of these studies provide direct empirical evidence, with 89 falling within a formal 2007–2025 search window, and three seminal studies from 2005 to 2006 purposively retained outside this window for theoretical grounding. The remaining two studies are prior reviews, retained solely to position this review against earlier work. Eligible studies were identified through a structured search of six databases and screened using PICOS-based criteria adapted for the econometric literature. Methodological quality was appraised using the Mixed Methods Appraisal Tool. The review’s primary contribution is a three-mechanism synthesis of amplification, threshold, and substitution, through which institutional quality moderates the growth and development effects of financial development. Institutions, in turn, independently shape financial development itself. Building on a gap identified within this synthesis, the review proposes, as a secondary and empirically untested extension, a FinTech Mediation Hypothesis. Financial technology may reduce transaction costs and information frictions along a pathway conditioned by institutional quality. The findings imply that institutional reform and financial-sector development should be pursued jointly, with FinTech regulatory frameworks designed to exploit this complementarity while safeguarding financial stability and consumer protection.