Financial inclusion and bank profitability in Sub‐Saharan Africa

Abstract

AbstractThis paper investigates the impact of financial inclusion on banks' profitability in Sub‐Saharan Africa. The paper employed the system generalized method of moments (GMM) dynamic pooled estimator for the computation of the parameters using data spanning from 1990 to 2017. The results show that there is an affirmative relationship between financial inclusion index (FINDEX) and bank profitability in Sub‐Saharan Africa. This suggests that financial inclusion is a significant driver of banks' profitability in Sub‐Saharan Africa. The policy implication of this study is that for banks in Sub‐Saharan African countries to increase their profitability and get optimum results from financial inclusion they must formulate policies aimed at promoting financial inclusion. This suggests that banks in Sub‐Saharan African countries must be creative and innovative in pursuing financial inclusion policies. Such policies should be targeted at increasing the number of bank branches and ATMs. Banks should also make effort at finding ways of making opening of bank accounts much easier for the vulnerable and marginalized in society by relaxing the requirements for customer identification in specific situations where they may hamper financial inclusion goals and efforts.