This study empirically evaluates spatial externalities in financial development in SADC in line with spatial proximity theory, which asserts that externalities increase with proximity. Precisely, the study tests if financially less developed economies in SADC benefit from linkages with and proximity to South Africa, a financially developed economy. The Spatial Durbin Model estimated using GMM and Dynamic Panel Estimations, establishes that financial development in the SADC region is sensitive to space and hence not immune to spatial externalities. Results indicate that monetary measures are highly sensitive to geography than credit and that allowing for spatiality, credit from South Africa crowds-out domestic and private credit of other SADC countries. Precisely, proximity to South Africa brings negative externalities in credit but positive externalities in money markets. Implicitly, the spatial variable has a substitution effect in the local credit market and a complementary effect in the money market. Estimations that controlled for effects of monetary union in the model also confirms that financial development is affected by spatiality in the money market and is not responsive to spatial effects in credit. The results also indicated that financial openness is a necessary condition for financial development to take place in the SADC region.