Foreign Bank Presence, Financial Stability, and Income Inequality: Empirical Evidence from Some Selected Countries in Africa

Khadijah Iddrisu ()
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Khadijah Iddrisu: Simon Diedong Dombo University of Business and Integrated Development Studies

Journal of the Knowledge Economy, 2025, vol. 16, issue 4, No 8, 14032-14056

Abstract: Abstract The issue of income inequality has been a canker in Africa. However, most African countries have a high influx of foreign bank presence (FBP) and are making efforts to stabilize their financial system. This study empirically examines whether FBP and financial stability independently alleviate income inequality across 33 African countries from 1995 to 2020, employing the two-step system generalized method of moment (2SGMM) technique. Furthermore, it explores how financial stability moderates the relationship between FBP and income inequality. Findings indicate that both FBP and financial stability contribute to reducing income inequality in Africa. Moreover, in the presence of financial stability, FBP has an additional diminishing effect on income inequality. The paper recommends that African countries should continue with regular stability checks to generate a robust financial system which can help FBP to further minimize income inequality.

Keywords: Foreign bank presence; Income inequality; Financial stability; Africa (search for similar items in EconPapers)
JEL-codes: E44 F23 G20 N27 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s13132-024-02412-y

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