Digital financial inclusion and economic growth in Sub-Saharan Africa: the role of institutions and governance

Abstract

PurposeThis study examines the role of institutions and governance on the digital financial inclusion and economic growth nexus in Sub-Saharan Africa (SSA) from 2014 to 2020.Design/methodology/approachThis study adopts the generalised method of moments technique which controls for endogeneity. The authors employed four main variables namely, index of digital financial inclusion, gross domestic product per capita growth, institutions and governance.FindingsThe results suggest a significant positive effect of institutional quality and governance on the digital financial inclusion-economic growth nexus in SSA. Furthermore, the authors find that effect of trade and population growth on economic growth was significantly positive while inflation reduces economic growth in the region.Research limitations/implicationsThis study also ignored the effect of digital financial inclusion on environmental quality. Future researches should focus on addressing these drawbacks and replicating the study in Africa as a whole and other developing countries across the world that are experiencing digital financial inclusion and economic growth challenges. The results from the study imply that a positive relationship between digital financial inclusion and economic growth. It is important to note that the study was carried out on the premise that institutions play a pivotal role in enhancing economic growth in SSA.Practical implicationsThe results confirm the significance of policies that enhances institutional quality and governance which are other avenues the authorities can pursue to enhance economic growth in SSA.Social implicationsThe paper documents the importance of institutions in boosting economic growth which impacts on social life rather than digital financial inclusion only.Originality/valueThe paper makes a contribution through analysing the role of institutions and governance on the digital financial inclusion-economic growth nexus rather than the traditional financial inclusion–economic growth nexus which is common to the majority of the available empirical studies.