Financial Inclusion and per Capita Income in Africa: Bayesian Var Estimates

Do higher per capita incomes translate into higher financial inclusion in Africa? Our application of the Bayesian VAR estimation approach to the World Bank Development Indicators datasets for 15 African countries provides affirmative evidence to this question. Using a Bayesian VAR approach for a panel of 15 countries in Africa over the period from 2005 to 2014, the findings show that per capital incomes, deposit interest rate and the internet has positive and significant impact on financial inclusion. That is, higher per capital incomes is associated with higher levels of financial inclusion in Africa. It is, however, interesting to note that financial inclusion is having a positive but insignificant impact on per capita income. Moreover, the internet is coming out to be a significant variable indicating that more attention is required to be paid to developing internet access in Africa for the advancement of financial inclusion. The findings of this study should be of help to African central banks’ policymakers and commercial bankers as they advance innovative approaches to enhance the involvement of excluded poor people in formal finance.