Digital Financial Inclusion and Economic Growth: Evidence from Sub-Saharan Africa (2011-2017)

Abstract

This paper examined the long run causal effect of digital financial inclusion on economic growth in sub-Saharan Africa. The study employs a sample of 22 sub-Sahara African countries using quarterly data from 2011-2017. The dependent variable was economic growth measured by GDP per capita with the indicators of digital financial inclusion being automated teller machine (ATM), number of commercial bank branches (CBB), Loan Outstanding (LOS), Mobile agent outlets (MOAO) and Mobile money transactions (MOMO). The long run causal effect of digital financial inclusion was analyzed using the vector error correction model and the granger causality test for causality and direction. The estimated results indicate that a long run causal relationship exists between digital financial inclusion and economic growth in sub-Sahara Africa and the direction of causality is unidirectional running from economic growth to digital financial inclusion. The study observed that digital financial inclusion strongly associated with the progress and development of the sub-Saharan economic growth. In spite of this, there is need for proper digital financial inclusion education, customer awareness, E-banking training and digital financial inclusion literacy programmes to all citizens alongside regulation in the continent to access financial services. Thus, digital financial inclusion is a long road which sub-Sahara Africa needs to travel to make it completely successful.