Effects of indigenization on financial development

Abstract

The research examines the effect of indigenization on financial development using secondary data from 2008–2012. A sample of 49 countries, using the financial development index (FDI), revealed that, Indigenization had a significant downward effect on financial development. Indigenization of manpower and that of technology had a significant negative effect on financial development with indigenization of manpower contributing more than indigenization of technology. When corruption was factored in, the negative effect became worse with corruption taking over indigenization of manpower as a leading effect followed by indigenization of technology. This means that when manpower is indigenized and developed, the potential positive effect gets diluted by corruption resulting in corruption’s negative effect on financial development. Regarding indigenization of technology, corruption takes place at the stage of training indigenous people to use the transferred technology to its full capacity. The providers of technology choose not to fully empower the receivers of technology forcing them to return to the providers when things do not work out. This research developed an economic model showing that financial development could improve if corruption’s influence on indigenization was minimized.