An Investigation of the Impact of Financial Inclusion on Economic Growth: Evidence from African Countries

Abstract

Financial inclusion has been recognized as a development policy priority and a key to economic growth in developing economies. Essentially, most Sub-Saharan African (SSA) countries have witnessed unstable economic growth over the last three decades. Financial inclusiveness is fundamental to sustainable growth for any economy. This study investigates the effects of financial inclusion on 41 Sub-Saharan African countries from 2004–2019, employing the generalized method of moments (GMM) method and a Granger causality analysis. The results show a positive relationship between financial inclusion and economic growth. The non-causality tests revealed bi-directional causality between the variables for the whole region and low-income and lower-middle-income countries. Furthermore, a unidirectional causality runs from financial inclusion to economic growth in upper-middle-income countries. The study concluded that financial inclusion positively affects the economic growth of SSA and recommends that policies and interventions be redefined in the financial system to achieve steady economic growth and sustainability.