The Impact of Financial Inclusion on Economic Growth and Poverty Reduction: Empirical Evidence from sub-Saharan Africa

Abstract

This study examines the impact of financial inclusion (FI) on economic growth (EG) and poverty reduction in 18 sub-Saharan Africa (SSA) over the period from 2014 to 2021. The study employs fixed effects, random effects, panel-corrected standard errors (PCSE), Driscoll Kraay standard errors, the generalized method of moments (GMM), and quantile regression. A FI composite index was created using principal component analysis (PCA). According to the findings from all the models, FI has a significant positive effect on EG, and it also reduces poverty in SSA. The findings from the quantile regression indicate that countries with a higher Human Development Index (HDI) have a more significant decline in poverty. Therefore, governments and policymakers must prioritize the implementation of policies that facilitate the accessibility, availability, and usability of financial products and services. Such measures will contribute to fostering inclusive economic growth and poverty reduction in SSA.