Abstract
This paper aims to assess the effect of inclusive finance on the level of inclusive growth in West African Economic and Monetary Union (WAEMU) countries. For that purpose, a synthetic indicator for inclusive growth is elaborated. Then, this indicator is used as an endogenous variable in a dynamic panel model including the main factors of the financial system as exogenous. About financial variables used in this paper, inclusive finance is apprehended by rate of use of banking services and microfinance penetration rate. In addition, the different types of bank interest rates are used in this analysis to show their effects on the evolution of inclusive growth. Results showed a positive and significant effect of the development of banking services on inclusion of growth in the (WAEMU) countries. However, the penetration rate of microfinance services did not show a significant effect on the evolution of inclusive growth of these economies. The levels of interest rates granted by banks according to the type of beneficiary (loans to individuals) or the item of use (equipment loans and consumer loans) negatively influence inclusive growth in the WAEMU countries. Overall, these results indicate that actions to promote the use of banking services would be beneficial to the process of inclusion of growth for WAEMU countries. With regard to microfinance services, actions must first focus on improving the efficiency of current microfinance services and then proceed to the popularization of these services.
Highlights
In African economies, several challenges remain in the implementation of monetary policy, in particular the catching up of the delay in economic and social development
The intervention of the monetary authorities in the quest for inclusive growth of West African Economic and Monetary Union (WAEMU) countries is mainly motivated by the repercussions that monetary and financial policies would have on the process of distribution and redistribution of wealth in the economy
Inclusive growth indicator measures the transmission between the economic growth caused in a given area and the equity in access to the opportunities provided by this growth
Summary
In African economies, several challenges remain in the implementation of monetary policy, in particular the catching up of the delay in economic and social development. Promoting inclusive growth through financial inclusion is a topical issue for the Central Bank of West African States. In April 2018, a financial inclusion department was instigated by the Governor of the Central Bank of West African States with the aim of federating all initiatives devoted to financial inclusion, with a view to contributing to the intensification of growth and the balanced sharing of its outcomes. The intervention of the monetary authorities in the quest for inclusive growth of West African Economic and Monetary Union (WAEMU) countries is mainly motivated by the repercussions that monetary and financial policies would have on the process of distribution and redistribution of wealth in the economy. In the implementation of policies to optimize the opportunities created by growth at the national level, the implementation of accompanying monetary policies would condition the achievement of the defined objectives in a sustainable way
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