ABSTRACT
Due to its intermediation functions to an economy such as mobilization of savings and reallocation of resources, most sub-Saharan African countries have been implementing series of reforms and regulations aimed at creating a reliable and stable financial sector. However, the outcomes remain very limited with access to finance still a major constraint of most SMEs, formal financial intermediation very shallow and non-performing loans persist. As prudential regulation is the principal mechanism through which the reforms have been pursued, this study questions its suitability to sub-Saharan Africa. The weakness of prudential regulation derives from its neoliberal orientation of one size fits all and market efficiency. In this approach, the level of institutional development in sub-Saharan Africa is not considered and her institutional peculiarities ignored. Expectedly, this results in contradictory and limited outcomes as observed from the outcomes and stage of the banking sector in most sub-Saharan African countries. To create an effective regulatory framework, a robust appreciation and integration of the relevant informal and formal institutions is fundamental. This will require a high utilization of informal laws and norms in crafting the regulation to enhance understanding, acceptance and compliance resulting in what can be described as localized or institutionally oriented regulation.
