Digital financial inclusion and economic growth in Sub-Saharan Africa: the role of institutions and governance

Abstract

PurposeThis study examines the role of institutions and governance on the digital financial inclusion and economic growth nexus in Sub-Saharan Africa (SSA) from 2014 to 2020.Design/methodology/approachThis study adopts the generalised method of moments technique which controls for endogeneity. The authors employed four main variables namely, index of digital financial inclusion, gross domestic product per capita growth, institutions and governance.FindingsThe results suggest a significant positive effect of institutional quality and governance on the digital financial inclusion-economic growth nexus in SSA. Furthermore, the authors find that effect of trade and population growth on economic growth was significantly positive while inflation reduces economic growth in the region.Research limitations/implicationsThis study also ignored the effect of digital financial inclusion on environmental quality. Future researches should focus on addressing these drawbacks and replicating the study in Africa as a whole and other developing countries across the world that are experiencing digital financial inclusion and economic growth challenges. The results from the study imply that a positive relationship between digital financial inclusion and economic growth. It is important to note that the study was carried out on the premise that institutions play a pivotal role in enhancing economic growth in SSA.Practical implicationsThe results confirm the significance of policies that enhances institutional quality and governance which are other avenues the authorities can pursue to enhance economic growth in SSA.Social implicationsThe paper documents the importance of institutions in boosting economic growth which impacts on social life rather than digital financial inclusion only.Originality/valueThe paper makes a contribution through analysing the role of institutions and governance on the digital financial inclusion-economic growth nexus rather than the traditional financial inclusion–economic growth nexus which is common to the majority of the available empirical studies.

Unveiling the drivers of Africa's digital financial inclusion journey

“…Previous literature on digital financial inclusion in Africa has increasingly utilized composite indices to assess its progress. However, these studies have been subject to several limitations (Al‐Smadi, 2023; Chinoda & Kapingura, 2023a, 2023b; Khera et al, 2022), underscoring the need for more comprehensive and nuanced evaluations of this critical development issue.…”

“…Moreover, the existing literature on digital financial inclusion in Africa has predominantly relied on either theoretical framework (Isukul & Tantua, 2021; Mhlanga, 2020; Telukdarie & Mungar, 2023), descriptive approaches (Agwu, 2021; Machasio, 2020) or macro‐level analyses (Beyene Fanta & Makina, 2019; Chinoda & Kapingura, 2023a, 2023b; Khera et al, 2022; Kouladoum et al, 2022; Tok & Heng, 2022). However, no study has successfully achieved the following three significant objectives in the realm of digital financial inclusion in Africa to date: (1) quantifying the level of digital financial inclusion in Africa in the post‐COVID‐19 era; (2) exploring the microeconomic determinants of the region's access and usage of digital financial services; and (3) identifying potential barriers that may impede African citizens from reaping the benefits of digital financial services.…”

Institutions and economic growth: the role of financial inclusion, public spending on education and the military

“…Ahmad and Law (2023) have shown that regardless of geographic location, countries with similar institutional characteristics exhibit the same levels of economic growth. Chinoda and Kapingura (2023) certified that institutions and governance exert positive effects on the relationship between financial inclusion and economic growth. Gyamfi et al (2022) demonstrated that in an environment with poor institutional quality, the effect of financial development on economic growth is negative.…”

Does Digital Financial Inclusion Matter for Agricultural Jobs Generation in the Post-Pandemic Era in SSA Countries?

“…The rapid expansion of ICT has reformed the nancial industry landscape with digital technologies, and nancial services can be relinquished in further e cient and less expensive pathways (Chinoda and Kapingura 2023; Niu et al 2022; Geng and He 2021). For instance, rather than establishing physical branches like bank outlets, nancial institutions can extend a diverse array of digital services to a wide customer base accessible through computers, smartphones, and other electronic devices (Niu et al 2022; Chinoda and Kapingura 2023). The ICT's integration with nance holds the potential to enhance nancial inclusion by inviting more individuals, especially those traditionally underserved, into the contemporary nancial system (Niu et al 2022;Liu et al 2021).…”