Determinants of Sustainable Financial Inclusion in Sub-Saharan Africa: A System GMM Approach

Meshesha Demie Jima and Patricia Lindelwa Makoni

Prague Economic Papers, 2023, vol. 2023, issue 6, 699-723

Abstract: There is no consensus on the key drivers of financial inclusion due to variation in the socioeconomic features of countries, use of indicators and research methods. The main objective of this study is, therefore, to empirically examine the key drivers of financial inclusion across 26 selected Sub-Saharan African (SSA) economies for the period between 2000 and 2019, using a system generalized method of moments (GMM). A principal component analysis (PCA) is applied to construct a composite index of financial inclusion to address the multi-dimensional nature of the variable. The findings of the study indicate that both the macroeconomic and microeconomic factors influence the level of financial inclusion of the SSA countries. Specifically, the lag effect, economic growth, financial stability, inflation, financial deepening, liquidity, profitability, and bank efficiency are important drivers of financial inclusion in the SSA region. It is therefore important for policy makers and regulators to consider these factors while developing policies and strategies that foster access to financial products and services and ensure financial inclusion in the region.

Keywords: financial inclusion; Sub-Saharan Africa; principal component analysis; bootstrap-based bias correction (BBBC); system GMM (search for similar items in EconPapers)
JEL-codes: C33 C38 E02 O16 O55 O56 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.18267/j.pep.845

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