The Effects of Economic and Financial Development on Financial Inclusion in Africa

This study provides empirical evidence on the effects of economic andfinancial development on financial inclusion in Africa, using panel FMOLSfor the 2005-2014 period. The study shows that economic growth has asignificant positive impact on financial inclusion, meaning that Africancountries with higher economic growth have more inclusive financialsystems. GDP per capita has a significant positive impact on financialinclusion. That is, income is an important factor in explaining the level offinancial inclusion in Africa. It is, as well, established in this study, thatalthough both economic and financial development promote financialinclusion, though the effects of economic development are much stronger.Also, inflation is negatively linked to financial inclusion, and as wellinsignificant across all specifications. Deposit interest rate is positivelylinked to financial inclusion, though insignificant. The low deposit interestrates in African countries do not encourage inclusive financial systems.Population, though positive, is insignificant. Internet has positivesignificant impact on financial inclusion, meaning that internet access isindispensable in a fast-moving and digital African economy. Literacy isalso statistically significant, meaning that adult literacy is an importantfactor in explaining the level of financial inclusion in Africa. As well,Islamic banking presence and activity are associated with higher financialinclusion