Abstract
This study examined the effect of financial inclusion in the trade-growth nexus in Zimbabwe using time series data collected from the World Bank databases from 1980 to 2016. The study precisely examined whether financial inclusion is a passage within which trade openness impacts growth in Zimbabwe. Also examined was the complementarity effect of financial inclusion and trade openness on growth. The effect of financial inclusion and trade openness on growth has received much attention from researchers across the globe and literature is awash with theoretical and empirical evidence of such studies. What is yet to be examined is whether financial inclusion is a passage within which trade openness influences growth. The study finds a negative significant effect of financial inclusion and trade openness on growth in Zimbabwe. Moreover, the findings show a complementary, strong and positive nexus linking financial inclusion and trade openness on growth in Zimbabwe. Policy-makers are, however, implored to formulate policies meant to deepen financial inclusion in order to enhance growth through trade openness. The article will help expand the academic knowledge and as such contribute in filling the gap that exists within the body of knowledge. The article is important to policy-makers, the academia, private sector and researchers at large.
Highlights
Background of the Study: Globally, financial inclusion has attracted a lot of attention from policy-makers, governments and researchers as one of the main pillars of economic development
To others, improved financial services increased economic activities and employment opportunities for rural households resulting in inclusive economic growth. (Sarma & Pais, 2010) find that financial inclusion (FI) reduces the dominance of informal financial institutions which are exploitative in nature and access to formal financial services increases the efficiency of the resource allocation and reduces the cost of capital
The study found that the impact of FI on productivity and GDP growth was positively significant in many instances; while the impact of FI on income inequality varies from instance to instance
Summary
Background of the Study: Globally, financial inclusion has attracted a lot of attention from policy-makers, governments and researchers as one of the main pillars of economic development. Despite the role of FI in economic development and growth, studies have shown that more than 2.7 billion people are still financially excluded (Otchere, 2016). Prior studies have yielded mixed and inconclusive results concerning the nexus between trade openness and GDP, there seems to be some consensus as the majority of the studies contend that trade has an influence on economic growth. Keho (2017) finds a positive significant nexus between trade and GDP in the short and long run
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