What is Financial Intermediation

Financial infrastructure development affects economic growth through several channels that are important for emerging economies such as catalysing savings, efficient allocation of capital and enhanced total factor productivity; risk diversification and control; reducing information asymmetries, transactions and monitoring costs; as well as reducing volatility of the economy. Hence, adopting an interpretivist perspective using analytical research strategy engaging mainly secondary documentary data; this chapter investigates the processes through which financial infrastructure development promotes financial market inclusivity, ameliorates the role of traditional banking, enables efficient allocation of resources, and generates knowledge-intensive capital accumulation leading to inclusive growth. Financial infrastructure development specially in Sub-Sahara Africa contributes to inclusive growth through enhanced financial reach and accessibility, supportive institutional framework and policy, credit availability and entrepreneurship, as well as trust and alignment of incentives.