IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/120238.html
   My bibliography  Save this paper

Effects of financial inclusion on financial stability: evidence from ssa countries

Author

Listed:
  • Damane, Moeti
  • Ho, Sin-Yu

Abstract

The study explores the link between financial inclusion and financial stability in 37 Sub-Saharan African countries. Results of our panel data analysis show that financial inclusion positively impacts financial stability, especially in low-income countries with low levels of financial stability. Additionally, prior improvements in financial stability were found to have positive effects on present levels of financial stability. The study recommends policymakers to enhance cooperation, target excluded communities for financial inclusion, improve financial literacy, and cross-fertilize skills.

Suggested Citation

  • Damane, Moeti & Ho, Sin-Yu, 2024. "Effects of financial inclusion on financial stability: evidence from ssa countries," MPRA Paper 120238, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:120238
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/120238/1/MPRA_paper_120238.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Alfred Hannig & Stefan Jansen, 2010. "Financial Inclusion and Financial Stability : Current Policy Issues," Finance Working Papers 23124, East Asian Bureau of Economic Research.
    2. Allen, Franklin & Demirguc-Kunt, Asli & Klapper, Leora & Martinez Peria, Maria Soledad, 2016. "The foundations of financial inclusion: Understanding ownership and use of formal accounts," Journal of Financial Intermediation, Elsevier, vol. 27(C), pages 1-30.
    3. Sanjaya Kumar Lenka & Arun Kumar Bairwa, 2016. "Does financial inclusion affect monetary policy in SAARC countries?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1127011-112, December.
    4. Brei, Michael & Gadanecz, Blaise & Mehrotra, Aaron, 2020. "SME lending and banking system stability: Some mechanisms at work," Emerging Markets Review, Elsevier, vol. 43(C).
    5. Peter J. Morgan & Victor Pontines, 2018. "Financial Stability And Financial Inclusion: The Case Of Sme Lending," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 63(01), pages 111-124, March.
    6. Josiah Aduda & Elizabeth Kalunda, 2012. "Financial Inclusion and Financial Sector Stability With Reference To Kenya: A Review of Literature," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 2(6), pages 1-8.
    7. M. Hashem Pesaran, 2021. "General diagnostic tests for cross-sectional dependence in panels," Empirical Economics, Springer, vol. 60(1), pages 13-50, January.
    8. Ratna Sahay & Martin Cihak & Papa M N'Diaye & Adolfo Barajas & Srobona Mitra & Annette J Kyobe & Yen N Mooi & Seyed Reza Yousefi, 2015. "Financial Inclusion; Can it Meet Multiple Macroeconomic Goals?," IMF Staff Discussion Notes 15/17, International Monetary Fund.
    9. João Jungo & Mara Madaleno & Anabela Botelho, 2022. "The Effect of Financial Inclusion and Competitiveness on Financial Stability: Why Financial Regulation Matters in Developing Countries?," JRFM, MDPI, vol. 15(3), pages 1-20, March.
    10. Kapetanios, G. & Pesaran, M. Hashem & Yamagata, T., 2011. "Panels with non-stationary multifactor error structures," Journal of Econometrics, Elsevier, vol. 160(2), pages 326-348, February.
    11. Martin Čihák & Davide Salvatore Mare & Martin Melecky, 2021. "Financial Inclusion and Stability: Review of Theoretical and Empirical Links [Risk in Islamic Banking]," The World Bank Research Observer, World Bank, vol. 36(2), pages 197-233.
    12. Lee, Chien-Chiang & Wang, Fuhao, 2022. "How does digital inclusive finance affect carbon intensity?," Economic Analysis and Policy, Elsevier, vol. 75(C), pages 174-190.
    13. Bernard Sarpong & Edward Nketiah-Amponsah, 2022. "Financial inclusion and inclusive growth in sub-Saharan Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2058734-205, December.
    14. Robert Cull & Asl? Demirgüç-Kunt & Timothy Lyman, 2012. "Financial Inclusion and Stability : What Does Research Show?," World Bank Publications - Reports 9443, The World Bank Group.
    15. Gamze Ozturk Danisman & Amine Tarazi, 2020. "Financial inclusion and bank stability: evidence from Europe," The European Journal of Finance, Taylor & Francis Journals, vol. 26(18), pages 1842-1855, December.
    16. Maurice Obstfeld & Jay C. Shambaugh & Alan M. Taylor, 2010. "Financial Stability, the Trilemma, and International Reserves," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 57-94, April.
    17. Aaron Mehrotra & James Yetman, 2015. "Financial inclusion - issues for central banks," BIS Quarterly Review, Bank for International Settlements, March.
    18. Chudik, Alexander & Pesaran, M. Hashem, 2015. "Common correlated effects estimation of heterogeneous dynamic panel data models with weakly exogenous regressors," Journal of Econometrics, Elsevier, vol. 188(2), pages 393-420.
    19. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 717-737.
    20. Feng-Wen Chen & Yuan Feng & Wei Wang, 2018. "Impacts of Financial Inclusion on Non-Performing Loans of Commercial Banks: Evidence from China," Sustainability, MDPI, vol. 10(9), pages 1-28, August.
    21. Hannig, Alfred & Jansen, Stefan, 2010. "Financial Inclusion and Financial Stability: Current Policy Issues," ADBI Working Papers 259, Asian Development Bank Institute.
    22. Ms. Ratna Sahay & Mr. Martin Cihak & Mr. Papa M N'Diaye & Mr. Adolfo Barajas & Ms. Srobona Mitra & Ms. Annette J Kyobe & Yen N Mooi & Mr. Seyed Reza Yousefi, 2015. "Financial Inclusion: Can it Meet Multiple Macroeconomic Goals?," IMF Staff Discussion Notes 2015/017, International Monetary Fund.
    23. M. Hashem Pesaran, 2006. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," Econometrica, Econometric Society, vol. 74(4), pages 967-1012, July.
    24. Trung Duc Nguyen & Quynh Lan Thi Du, 2022. "The effect of financial inclusion on bank stability: Evidence from ASEAN," Cogent Economics & Finance, Taylor & Francis Journals, vol. 10(1), pages 2040126-204, December.
    25. Barry Eichengreen, 1998. "Exchange Rate Stability and Financial Stability," Open Economies Review, Springer, vol. 9(1), pages 569-608, January.
    26. Jong-Hee Kim, 2016. "A Study on the Effect of Financial Inclusion on the Relationship Between Income Inequality and Economic Growth," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 52(2), pages 498-512, February.
    27. Asghar Kamal & Talat Hussain & M. Mahmood Shah Khan, 2021. "Impact of Financial inclusion and financial stability: Empirical and theoretical review," Liberal Arts and Social Sciences International Journal (LASSIJ), IDEA PUBLISHERS, vol. 5(1), pages 510-524.
    28. Luc Laeven & FabiÁn Valencia, 2013. "The Real Effects of Financial Sector Interventions during Crises," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(1), pages 147-177, February.
    29. Neaime, Simon & Gaysset, Isabelle, 2018. "Financial inclusion and stability in MENA: Evidence from poverty and inequality," Finance Research Letters, Elsevier, vol. 24(C), pages 230-237.
    30. Ann L. Owen & Javier M. Pereira, 2018. "Bank concentration, competition, and financial inclusion," Review of Development Finance Journal, Chartered Institute of Development Finance, vol. 8(1), pages 1-17.
    31. Ahamed, M. Mostak & Mallick, Sushanta K., 2019. "Is financial inclusion good for bank stability? International evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 403-427.
    32. Tafirei Mashamba & Shenaaz Gani, 2023. "Fintech, bank funding, and economic growth in Sub-Saharan Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(1), pages 2225916-222, December.
    33. Serge Jeanneau, 2014. "Financial stability objectives and arrangements - what's new?," BIS Papers chapters, in: Bank for International Settlements (ed.), The role of central banks in macroeconomic and financial stability, volume 76, pages 47-58, Bank for International Settlements.
    34. Giovanni Dell'Ariccia & Robert Marquez, 2006. "Lending Booms and Lending Standards," Journal of Finance, American Finance Association, vol. 61(5), pages 2511-2546, October.
    35. Naceur, Sami Ben & Candelon, Bertrand & Lajaunie, Quentin, 2019. "Taming financial development to reduce crises," Emerging Markets Review, Elsevier, vol. 40(C), pages 1-1.
    36. Antonella Francesca Cicchiello & Amirreza Kazemikhasragh & Stefano Monferrá & Alicia Girón, 2021. "Financial inclusion and development in the least developed countries in Asia and Africa," Journal of Innovation and Entrepreneurship, Springer, vol. 10(1), pages 1-13, December.
    37. Michael Chibba, 2009. "Financial Inclusion, Poverty Reduction and the Millennium Development Goals," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 21(2), pages 213-230, April.
    38. Azka Azifah Dienillah & Lukytawati Anggraeni & Sahara, 2018. "Impact Of Financial Inclusion On Financial Stability Based On Income Group Countries," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 20(4), pages 1-14, April.
    39. Jan Ditzen, 2016. "xtdcce: Estimating Dynamic Common Correlated Effects in Stata," SEEC Discussion Papers 1601, Spatial Economics and Econometrics Centre, Heriot Watt University.
    40. Jianqing Fan & Yuan Liao & Jiawei Yao, 2015. "Power Enhancement in High‐Dimensional Cross‐Sectional Tests," Econometrica, Econometric Society, vol. 83(4), pages 1497-1541, July.
    41. Eyup Dogan & Fahri Seker & Serap Bulbul, 2017. "Investigating the impacts of energy consumption, real GDP, tourism and trade on CO2 emissions by accounting for cross-sectional dependence: A panel study of OECD countries," Current Issues in Tourism, Taylor & Francis Journals, vol. 20(16), pages 1701-1719, December.
    42. Onyinye I. Anthony-Orji & Anthony Orji & Jonathan E. Ogbuabor & Emmanuel O. Nwosu, 2019. "Do financial stability and institutional quality have impact on financial inclusion in developing economies? A new evidence from Nigeria," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 11(1), pages 18-40.
    43. Peterson K. Ozili, 2018. "Impact of digital finance on financial inclusion and stability," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 18(4), pages 329-340, December.
    44. repec:idn:jimfjn:v:5:y:2019:i:2h:p:1-20 is not listed on IDEAS
    45. Shreya Pal & Indranil Bandyopadhyay, 2022. "Impact of financial inclusion on economic growth, financial development, financial efficiency, financial stability, and profitability: an international evidence," SN Business & Economics, Springer, vol. 2(9), pages 1-29, September.
    46. Liliana Eva Donath & Laura Mariana Cismas, 2008. "Determinants of Financial Stability," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 11(29), pages 27-44, (3).
    47. Robin Burgess & Rohini Pande, 2005. "Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment," American Economic Review, American Economic Association, vol. 95(3), pages 780-795, June.
    48. Binder, Martin & Coad, Alex, 2011. "From Average Joe's happiness to Miserable Jane and Cheerful John: using quantile regressions to analyze the full subjective well-being distribution," Journal of Economic Behavior & Organization, Elsevier, vol. 79(3), pages 275-290, August.
    49. Ozili, Peterson K, 2021. "Financial inclusion: the globally important determinants," MPRA Paper 111342, University Library of Munich, Germany.
    50. Rajesh Barik & Sanjaya Kumar Lenka, 2023. "Does financial inclusion control corruption in upper-middle and lower-middle income countries?," Asia-Pacific Journal of Regional Science, Springer, vol. 7(1), pages 69-92, March.
    51. Rafael E. De Hoyos & Vasilis Sarafidis, 2006. "Testing for cross-sectional dependence in panel-data models," Stata Journal, StataCorp LP, vol. 6(4), pages 482-496, December.
    52. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
    53. Asghar Kamal & Talat Hussain & M. Mahmood Shah Khan, 2021. "Impact of Financial inclusion and financial stability: Empirical and theoretical review," Liberal Arts and Social Sciences International Journal (LASSIJ), IDEA PUBLISHERS, vol. 5(1), pages 514-527.
    54. Ozili, Peterson Kitakogelu, 2018. "Impact of Digital Finance on Financial Inclusion and Stability," MPRA Paper 84771, University Library of Munich, Germany.
    55. Thorsten Beck & Asli Demirgüç-Kunt & Ross Levine, 2007. "Finance, inequality and the poor," Journal of Economic Growth, Springer, vol. 12(1), pages 27-49, March.
    56. Dinabandhu Sethi & Debashis Acharya, 2018. "Financial inclusion and economic growth linkage: some cross country evidence," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 10(3), pages 369-385, June.
    57. Jan Ditzen, 2016. "xtdcce2: Estimating dynamic common correlated effects in Stata," United Kingdom Stata Users' Group Meetings 2016 08, Stata Users Group.
    58. Abdelaziz Hakimi & Rim Boussaada & Majdi Karmani, 2022. "Are financial inclusion and bank stability friends or enemies? Evidence from MENA banks," Applied Economics, Taylor & Francis Journals, vol. 54(21), pages 2473-2489, May.
    59. Yawovi M. A. Koudalo & Moumbark Toure, 2023. "Does financial inclusion promote financial stability? Evidence from Africa," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(2), pages 2225327-222, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Damane, Moeti & Ho, Sin-Yu, 2024. "The impact of financial inclusion on financial stability: review of theories and international evidence," MPRA Paper 120369, University Library of Munich, Germany.
    2. Shahid Manzoor Shah & Amjad Ali, 2022. "A Survey on Financial Inclusion: Theoretical and Empirical Literature Review," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 8(4), pages 310-330, December.
    3. Guillermo Boitano & Deybi Franco Abanto, 2020. "Challenges of financial inclusion policies in Peru," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 12(1), pages 89-117, June.
    4. Wang, Rui & Luo, Hang (Robin), 2022. "How does financial inclusion affect bank stability in emerging economies?," Emerging Markets Review, Elsevier, vol. 51(PA).
    5. Gallego-Losada, María-Jesús & Montero-Navarro, Antonio & García-Abajo, Elisa & Gallego-Losada, Rocío, 2023. "Digital financial inclusion. Visualizing the academic literature," Research in International Business and Finance, Elsevier, vol. 64(C).
    6. Feghali, Khalil & Mora, Nada & Nassif, Pamela, 2021. "Financial inclusion, bank market structure, and financial stability: International evidence," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 236-257.
    7. Banna, Hasanul & Kabir Hassan, M. & Rashid, Mamunur, 2021. "Fintech-based financial inclusion and bank risk-taking: Evidence from OIC countries," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    8. Weidong Chen & Xiaohui Yuan, 2021. "Financial inclusion in China: an overview," Frontiers of Business Research in China, Springer, vol. 15(1), pages 1-21, December.
    9. Ozili, Peterson K, 2020. "Financial inclusion research around the world: a review," MPRA Paper 101809, University Library of Munich, Germany.
    10. Murshed, Muntasir & Ahmed, Rizwan & Al-Tal, Raad Mahmoud & Kumpamool, Chamaiporn & Vetchagool, Witchulada & Avarado, Rafael, 2023. "Determinants of financial inclusion in South Asia: The moderating and mediating roles of internal conflict settlement," Research in International Business and Finance, Elsevier, vol. 64(C).
    11. Anh The Vo & Loan Thi-Hong Van & Duc Hong Vo & Michael Mcaleer, 2019. "Financial Inclusion And Macroeconomic Stability In Emerging And Frontier Markets," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 14(02), pages 1-15, June.
    12. Shreya Pal & Indranil Bandyopadhyay, 2022. "Impact of financial inclusion on economic growth, financial development, financial efficiency, financial stability, and profitability: an international evidence," SN Business & Economics, Springer, vol. 2(9), pages 1-29, September.
    13. Ozili, Peterson K, 2020. "Optimal financial inclusion," MPRA Paper 101808, University Library of Munich, Germany.
    14. Ozili, Peterson Kitakogelu & Adamu, Ahmed, 2021. "Does financial inclusion reduce non-performing loans and loan loss provisions?," MPRA Paper 109321, University Library of Munich, Germany.
    15. Ahamed, M. Mostak & Mallick, Sushanta K., 2019. "Is financial inclusion good for bank stability? International evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 403-427.
    16. Singh, Vinay Kumar & Ghosh, Sajal, 2021. "Financial inclusion and economic growth in India amid demonetization: A case study based on panel cointegration and causality," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 674-693.
    17. Zhian Zhiow Augustinne Wong & Ramez Abubakr Badeeb & Abey P. Philip, 2023. "Financial Inclusion, Poverty, and Income Inequality in ASEAN Countries: Does Financial Innovation Matter?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 169(1), pages 471-503, September.
    18. Ozili, Peterson K, 2020. "Theories of financial inclusion," MPRA Paper 101810, University Library of Munich, Germany.
    19. López, Tania & Winkler, Adalbert, 2019. "Does financial inclusion mitigate credit boom-bust cycles?," Journal of Financial Stability, Elsevier, vol. 43(C), pages 116-129.
    20. Pradhan, Rudra P. & Arvin, Mak B. & Nair, Mahendhiran S. & Hall, John H. & Bennett, Sara E., 2021. "Sustainable economic development in India: The dynamics between financial inclusion, ICT development, and economic growth," Technological Forecasting and Social Change, Elsevier, vol. 169(C).

    More about this item

    Keywords

    Sub-Saharan Africa; Financial Inclusion; Financial Stability; Dynamic Common Correlated Effects; Quantile Regression;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • G2 - Financial Economics - - Financial Institutions and Services
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:120238. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.