Addressing Food Security in Sub-Saharan African Region: The Role of Financial Sector Development and Informality

Finance is a critical factor in all stages of the food enterprise, from production to distribution, procurement, and consumption. Yet, in many developing countries, weak financial sector development and the prevalence of unregulated self-employed economic activities pose a significant challenge to food security. This study examines the extent to which the financial sector development and informality influence food security in Sub-Saharan Africa (SSA). We develop a conceptual framework linking financial sector development to food production and test it empirically, controlling for the role of informality. The findings show that the effect of financial development on food production in SSA is inconclusive and sensitive to the measures employed. In terms of informality, total, female, and male self-employment are generally found to hinder food security, although the magnitude and direction of these effects differ across income and regional groupings. Importantly, the interaction between financial sector indicators and informality measures suggests that access to finance enhances the potential of the informal sector to contribute positively to food production. These findings suggest that developing countries should prioritize both the regulation of the informal sector and the strengthening of financial sector institutions to expand access to finance. Their combined effects hold the potential to improve food production and, ultimately, food security in SSA.