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Assessing the Welfare Impact of Financial Inclusion through Consumption Diversification in West Africa: A Parametric and Non-Parametric Approach

Author

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  • Sanoh Yusuf

    (Graduate School of Economics, The University of Osaka)

Abstract

This study investigates the causal impact of financial inclusion on household welfare in West Africa by analyzing consumption diversification using Living Standards Measurement Study (LSMS) data from the World Bank on 51,851 households across seven countries of the West African Economic and Monetary Union (WAEMU). Instrumental Variables (IV) and Propensity Score Matching (PSM) were used for causal inference. The findings show that financial inclusion operates through distinct channels: it promotes food expenditure concentration via quality upgrading, expands non-food consumption into areas such as education and health, and induces structural reallocation from food to non-food budgets, with effects varying by financial modality. The results demonstrate that formal banking and microfinance drive long-term structural change. In contrast, mobile banking primarily facilitates short-term liquidity, offering targeted policy insights for enhancing financial inclusion strategies in the region.

Suggested Citation

  • Sanoh Yusuf, 2026. "Assessing the Welfare Impact of Financial Inclusion through Consumption Diversification in West Africa: A Parametric and Non-Parametric Approach," Discussion Papers in Economics and Business 26-10, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:2610
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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