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Financial inclusion and financial sector development in Sub-Saharan Africa: a panel VAR approach

Author

Listed:
  • Ebenezer Bugri Anarfo
  • Joshua Yindenaba Abor
  • Kofi Achampong Osei
  • Agyapomaa Gyeke-Dako

Abstract

Purpose - The purpose of this paper is to investigate the dynamic link between financial inclusion and financial sector development (FSD) in Sub-Saharan Africa. Design/methodology/approach - This paper employs a panel vector autoregressive framework to examine the dynamic link between financial inclusion and FSD in Sub-Saharan Africa. Findings - The findings indicate that there is a reverse causality between FSD and financial inclusion in both the Sub-Saharan Africa countries sample and the full sample. It is evident that financial inclusion is a driver of FSD and vice versa. Practical implications - The practical implication of this study is that financial inclusion should not only be pursued as a policy objective but it could also be an outcome variable of FSD and vice versa. This implies that African economies and governments in their effort to enhance financial inclusion, FSD can serve as a policy tool. This means that policies aimed at promoting financial inclusion will not impede FSD because the two are complementary. This suggests that we can achieve financial inclusion without sacrificing FSD and vice versa. Originality/value - This paper provides first empirical evidence of the link between financial inclusion and FSD from the Sub-Saharan Africa perspective using data sourced from World Development Indicators spanning from 1990 to 2014 for 48 Sub-Saharan African economies and 217 economies in the world for the full sample.

Suggested Citation

  • Ebenezer Bugri Anarfo & Joshua Yindenaba Abor & Kofi Achampong Osei & Agyapomaa Gyeke-Dako, 2019. "Financial inclusion and financial sector development in Sub-Saharan Africa: a panel VAR approach," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 15(4), pages 444-463, April.
    • Handle: RePEc:eme:ijmfpp:ijmf-07-2018-0205
    DOI: 10.1108/IJMF-07-2018-0205
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    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Ozili, Peterson K, 2022. "Achieving financial inclusion: whatever it takes," MPRA Paper 115784, University Library of Munich, Germany.
    2. Folorunsho M. Ajide, 2021. "Shadow economy in Africa: how relevant is financial inclusion?," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 29(3), pages 297-316, April.
    3. Nur Diniey Ezzati Zainorin & Syuhada Jalaludin & Nor Farradila Abdul Aziz & Balachandran Balasingam, 2023. "Determinants of Financial Inclusion in OIC Countries," Information Management and Business Review, AMH International, vol. 15(2), pages 9-16.
    4. US Thathsarani & Jianguo Wei & GRSRC Samaraweera, 2021. "Financial Inclusion’s Role in Economic Growth and Human Capital in South Asia: An Econometric Approach," Sustainability, MDPI, vol. 13(8), pages 1-18, April.
    5. Peter W. Muriu, 2021. "Does the Quality of Institutions Matter for Financial Inclusion? Cross Country Evidence," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 13(7), pages 1-27, June.
    6. Anarfo, Ebenezer Bugri & Abor, Joshua Yindenaba & osei, Kofi Achampong, 2020. "Financial regulation and financial inclusion in Sub-Saharan Africa: Does financial stability play a moderating role?," Research in International Business and Finance, Elsevier, vol. 51(C).
    7. MB Hendrie Anto & Faaza Fakhrunnas & Yunice Karina Tumewang, 2022. "Islamic banks credit risk performance for home financing: Before and during Covid-19 pandemic," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 14(1), pages 113-125.
    8. Suman Dahiya & Manoj Kumar, 2020. "Linkage between Financial Inclusion and Economic Growth: An Empirical Study of the Emerging Indian Economy," Vision, , vol. 24(2), pages 184-193, June.
    9. Ibrahim Niankara, 2022. "Government and private sectors' electronic transfer practices and financial inclusion in the economic community of the West African States," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4018-4047, October.
    10. Ozili, Peterson K, 2022. "Financial inclusion and sustainable development: an empirical association," MPRA Paper 115772, University Library of Munich, Germany.

    More about this item

    Keywords

    Economic growth; Financial inclusion; Financial sector development; Panel vector autoregression; A10; B23; B26; E44;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • B23 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Econometrics; Quantitative and Mathematical Studies
    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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