The advocacy-growth nexus: the case of the Egyptian banking sector

Abstract

Purpose – The Egyptian banking sector has acted as an arena for multiple alliances, some of which bred crony capitalism and others acted as growth alliances. The purpose of this paper is to examine the effect of private sector advocacy in the Egyptian banking sector on macroeconomic performance, with the prime aim of designing an Egyptian-centric roadmap outlining precepts of good advocacy between bankers, policymakers and businesses. Design/methodology/approach – The study uses a two-stage model. In the first stage an advocacy construct is developed using confirmatory factor analysis. In the second stage the relationship between advocacy and macroeconomic growth is measured by running a set of parsimonious regressions. Findings – The empirical results show a strong relationship between advocacy and growth, albeit not on inflation rates, suggesting that an innovative set of public policy instruments is needed to promote private advocacy efforts and to institutionalise private-public partnerships. This is an innately pressing mission for the new government to mitigate the impact of the double-digit inflation that has prevailed since the Triple-F – food, fuel and finance – Crisis of 2006. Practical implications – The ousted Egyptian government failed to protect its citizens from crony alliances and corruption, be it abuse of public resources or unfair access to bank credit. Hence, the prime aim is to design a future roadmap for the endorsement of effective growth alliances between businesses, bankers and policymakers. The recommendations proposed by this study would prove helpful to future public policymakers in the fulfilment of the macroeconomic aspirations of the Egyptian society as well as to other emerging and developing nations that share similar problems. Social implications – The research addresses how reforms can be designed in an egalitarian fashion to direct credit to growth enhancing and job-generating sectors since a prompt treatment of these problems at their roots is apt to minimise the probabilities of future social turmoil. This is apt to assist the Egyptian people to transition to a truly democratic society and to convert street rebellions into inclusive institutional activism. Originality/value – This paper adds to the literature a measurable construct gauging the relationship between advocacy in the banking sector and growth. Another contribution is the set of policies proposed to institutionalise rightful advocacy efforts.