Government and private sectors' electronic transfer practices and financial inclusion in the economic community of the West African States

Abstract

AbstractRelying on a pooled‐cross‐sectional panel of the 2014 and 2017 Global Findex data, and a random utility theoretic model for revealed financial preferences data analysis, this paper examines the impact of government and private sectors' electronic transfer practices on financial inclusion, in terms of individuals' ability to save and borrow within the Economic Community of the West African States (ECOWAS). For sensitivity analysis, we adopt a sequential empirical strategy, in which we estimate and contrast four specifications of the saving and borrowing processes. Overall, our findings are stable across all specifications and show that along with socio‐economic factors such as age and income, public welfare transfers and employment‐based salary transfers foster financial inclusion by significantly raising individuals' marginal propensity to save (MPS) (by 11.6% and 12.9% respectively) and marginal propensity to borrow (MPB) (by 12.6% and 8.2% respectively) within ECOWAS. We found however that, within ECOWAS, both MPS and MPB have decreased by 21.4% and 7.2%, respectively, between 2014 and 2017. Therefore, in addition to other economic growth promoting fiscal tools in national governments' toolkits, mandates on public (governments to citizens) and private (Business to citizens) electronic financial transfers are significant policy leverages for improving financial inclusion and growth within ECOWAS.