Financial Inclusion and Economic Development in Africa

Abstract

Post-2015 Development Agenda put financial inclusion as a key objective for United Nations member countries. This objective seeks to improve people's livelihoods, reduce poverty, and advance economic development in member countries. It is asserted that there is a significant relationship between financial inclusion and economic development, which Post-2015 Development Agenda seek to achieve. To corroborate a panel data were collected from 2000 to 2017 for 41 countries in Africa. Using a GMM estimation technic, the article corroborates the reviewed literature, which asserts appositive relation. Of the three attributes (financial access, financial stability, and financial efficiency) of financial inclusion considered in this article, financial access turned out to be significant in explaining economic development in Africa. Even though Africa is far behind the rest of the continent in financial inclusiveness, some countries like South Africa and Seychelles have financially inclusive societies in terms of financial access. If Africa can build a financially inclusive society, the continent would block financial linkages in commercial banks' ability to create money for economic development. Policies that seek to maintain the soundness and stability of banks and other deposit-taking financial institutions are hitting the nail on the head.