Financial Inclusion, Mobile Money, and Tax Revenue in Africa

Pengyu Ren, Toure Moumbark, Ebenezer Appiah and Yawovi M. A. Koudalo

SAGE Open, 2025, vol. 15, issue 1, 21582440251315222

Abstract: Financial inclusion (FI) could create vast sums of revenue in the African economy, generating numerous chances and difficulties for countries. As the population becomes more financially included, their income rises over time, increasing government tax contributions. This paper investigates whether tax revenue changes are related to the evolution of financial inclusion (FI) in Africa. The paper employed panel microdata from 36 African countries from 2011 to 2017. The data was sourced from the Global Findex database. The paper uses Fixed Effects (FE) and Generalized Method of Moment (GMM) strategies. The empirical results indicate that the relationship between financial inclusion (FI) and tax revenue is significant and positive, proving that more access to financial services defined by credit card ownership (% age 15+) increases government tax revenue. The result using different tax proxies and other FI proxies is robust. The paper also unearths that mobile money, an alternative for FI, decreases tax revenue. Governments should prioritize policies that promote access to basic banking services, such as savings and checking accounts and consider providing tax incentives for mobile money operators who facilitate transactions that contribute to formal economic activity. JEL Classification: E62, H24, O16, G20

Keywords: African economy; tax revenue; financial inclusion; mobile money; Global Findex (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:sae:sagope:v:15:y:2025:i:1:p:21582440251315222

DOI: 10.1177/21582440251315222

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