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Financial inclusion, income inequality, and institutions in sub-Saharan Africa: Identifying cross-country inequality regimes

Author

Listed:
  • Relwendé Sawadogo

    (UJZK - Université Joseph Ki-Zerbo de Ouagadougou = University of Ouagadougou)

  • Gervasio Semedo

    (LEO - Laboratoire d'Économie d'Orleans [2021-2022] - UO - Université d'Orléans - UT - Université de Tours)

Abstract

This paper applies a finite mixture model to a sample of 28 sub-Saharan African countries to analyse the impact of financial inclusion on income inequality between 2004 and 2016. We hypothesise that the effect of financial inclusion on income inequality differs across groups of countries with similar but unobserved characteristics. We find that the impact of financial inclusion on income inequality varies across two distinct classes of countries. Furthermore, we prove that countries with high institutional quality are more likely to be in the class where financial inclusion reduces income inequality. The results pass a battery of robustness checks. These findings highlight the need for sub-Saharan African countries to develop better democratic environments and institutions if they expect to reap the benefits of financial inclusion.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Relwendé Sawadogo & Gervasio Semedo, 2021. "Financial inclusion, income inequality, and institutions in sub-Saharan Africa: Identifying cross-country inequality regimes," Post-Print hal-03578634, HAL.
    • Handle: RePEc:hal:journl:hal-03578634
    DOI: 10.1016/j.inteco.2021.05.002
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    Cited by:

    1. Afonso, António & Blanco-Arana, M. Carmen, 2024. "Does financial inclusion enhance per capita income in the least developed countries?," International Economics, Elsevier, vol. 177(C).
    2. 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.
    3. Armand Fréjuis Akpa & Dado Fabrice Degbedji & Augustin Foster Chabossou, 2024. "Assessing the effect of financial inclusion on human capital in West Africa: an heterogeneous analysis based on income level," SN Business & Economics, Springer, vol. 4(1), pages 1-18, January.
    4. António Afonso & M. Carmen Blanco-Arana, 2025. "Creating Businesses in the Least Developed Countries: Does the Regulatory Environment Matter?," CESifo Working Paper Series 11838, CESifo.
    5. Bakouan, Pousseni & Sawadogo, Relwendé, 2024. "BioTrade and income inequality: Does frontier technology readiness matter?," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 650-665.
    6. Md Jamil, Abd Rahim & Law, Siong Hook & Khair-Afham, M.S. & Trinugroho, Irwan, 2024. "Financial inclusion and income inequality in developing countries: The role of aging populations," Research in International Business and Finance, Elsevier, vol. 67(PA).
    7. Xuan T. T. Pham & Thu B. Luu, 2024. "Effect of FinCredit on income inequality: the moderating role of financial inclusion," Review of Quantitative Finance and Accounting, Springer, vol. 62(3), pages 953-969, April.
    8. Hermann Ndoya & Simplice A. Asongu, 2022. "Digital divide, globalization and income inequality in sub-Saharan African countries: analysing cross-country heterogeneity," Social Responsibility Journal, Emerald Group Publishing Limited, vol. 20(1), pages 1-19, October.
    9. Gift Mbewe & Yanzhi Zhao & Chuanzhong Tang, 2025. "Inflation and income inequality: does human capital development matter?," SN Business & Economics, Springer, vol. 5(9), pages 1-21, September.
    10. Sawadogo, Relwendé & Ouoba, Youmanli, 2024. "Do natural resources rents reduce income inequality? A finite mixture of regressions approach," Resources Policy, Elsevier, vol. 91(C).
    11. Zhao, Congyu & Jia, Rongwen & Dong, Kangyin, 2023. "Does financial inclusion achieve the dual dividends of narrowing carbon inequality within cities and between cities? Empirical evidence from China," Technological Forecasting and Social Change, Elsevier, vol. 195(C).
    12. Salman Mahmood & Wen Shuhui & Shoaib Aslam & Tanveer Ahmed, 2023. "Financial Inclusion: Does it matter in Alleviating Poverty in Pakistan," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 169(3), pages 1125-1146, October.
    13. Baozhen Chen & Jinzheng Ren, 2022. "Does the Adoption of Digital Payment Improve the Financial Availability of Farmer Households? Evidence from China," Agriculture, MDPI, vol. 12(9), pages 1-20, September.
    14. Koomson, Isaac & Koomson, Paul & Abdul-Mumuni, Abdallah, 2023. "Trust in banks, financial inclusion and the mediating role of borrower discouragement," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 1418-1431.
    15. Zhang, Jiaping & Zhang, Huirong & Gong, Xiaomei, 2022. "Mobile payment and rural household consumption: Evidence from China," Telecommunications Policy, Elsevier, vol. 46(3).
    16. Bosede Ngozi Adeleye, 2024. "Income Inequality, Human Capital and Institutional Quality in Sub-Saharan Africa," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 171(1), pages 133-157, January.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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