Natural Hazards and Financial Development in Sub-Saharan Africa: The Moderating Role of the Stage of Development

The rise in natural hazards and disasters has necessitated understanding their impact on affected regions. Employing data from the Emergency Event Database over the period 1990–2019 and the Generalized Method of Moment estimation technique, this study examined the effect of flood, drought, storms, and aggregate natural hazards on financial institution development, financial market development and overall financial development as well as the moderating role of the stage of development on the natural hazards-financial development nexus in Sub-Saharan Africa. Our results reveal that natural hazards negatively affect financial development in Sub-Saharan Africa. Also, the stage of development significantly moderated the relationships for most of the models. This study recommends that financial sector regulators pay attention to natural disasters in terms of policies and regulatory frameworks. Further, policies to address the negative effect of natural disasters on financial development must consider the stage of development.