Mobilization of Private Financing and Industrialization: Evidence from 15 African Countries

Purpose: This study investigates how private financing affects industrialization in Africa. It focuses on whether domestic savings and personal remittances strengthen or weaken manufacturing value added and the broader industrialization rate. Method: The paper analyzes a panel of 15 African countries from 2006 to 2020 using data from the World Bank’s World Development Indicators (WDI) and Worldwide Governance Indicators (WGI). The empirical strategy combines preliminary ordinary least squares (OLS) fixed- and random-effects estimates with feasible generalized least squares (FGLS). A three-stage least squares (3SLS) specification is used as a robustness check. Results and findings: The results show that gross domestic savings are positively associated with both manufacturing value added and the industrialization rate. Personal remittances, by contrast, have a negative association with the two measures of industrialization in the sample. Urbanization, gross domestic product (GDP) per capita, and political stability also show important links with industrial outcomes, although the direction and strength of the control variables vary across specifications. Recommendation: African policymakers should deepen domestic savings, improve the formal financial system’s ability to intermediate local capital, and design public-private partnership models that channel private finance toward productive infrastructure and manufacturing. Remittance policies should also move beyond transfer facilitation and encourage diaspora investment platforms that can support industrial ventures. Originality: The study contributes to the literature by examining two private-financing channels within a multi-country African panel and by comparing their effects across two related measures of industrialization. It also adds policy relevance by showing that not all forms of private finance automatically translate into industrial transformation.