An Investigation into the Level of Financial Inclusion in Sub-Saharan Africa

Open access

Abstract

Financial inclusion is crucial for redistribution of economic resources between the deficit and surplus units in an economy. Despite the importance of financial inclusion, especially for economic growth of developing regions such as Sub-Saharan Africa, the prevailing level financial inclusion remain an open question. Against this background, this study investigates the level of financial inclusion in Sub-Saharan Africa between 2005 and 2015. This study employs secondary data obtained from the International Monetary Fund (IMF). The data obtained was subjected to Principal Component Analysis to determine the level of financial inclusion in Sub-Saharan Africa. The findings show that Sub-Saharan Africa has a medium level of financial inclusion during the observed period with Index of Financial Inclusion (IFI) value of 0.095023. The study concludes that Sub-Saharan Africa has high propensity to achieve a high level of financial inclusion in the region if more outlets of financial institutions are established.

If the inline PDF is not rendering correctly, you can download the PDF file here.

  • Akudugu M. A. 2013. The determinants of financial inclusion in Western Africa: Insights from Ghana. 4(8) 1-10.

  • Allen F. Demirgüç-Kunt A. Klapper L. and Martinez Peria M. 2012. The foundations of financial inclusion: Understanding ownership and use of formal accounts. Policy Research Working Paper no. 6290. World Bank. Washington DC.

  • Alter A. and Yontcheva B. 2015. Financial inclusion and development in the CEMAC. IMF Working Paper no. 235. International Monetary Fund. Washington DC.

  • Aluko O. A. and Ajayi M. A. 2018. Determinants of banking sector development: Evidence from Sub-Saharan African countries. Borsa Istanbul Review 18(2) 112-139.

  • Ambarkhane D. Singh A. S. and Venkataramani B. 2016. Measuring financial inclusion of Indian States. International Journal of Rural Management 12(1) 72-100. http://dx.doi.org/10.1177/0973005216633940

  • Amidžić G. Massara A. and Mialou A. 2014. Assessing countries’ financial inclusion Standing - A New Composite Index IMF Working Paper No. 26. International Monetary Fund. Washington DC.

  • Andrianaivo M. and Yartey C. A. 2010. Understanding the growth of African financial markets. African Development Review 22(3) 394-418. http://dx.doi.org/10.1111/j.1467-8268.2010.00253.x

  • Arora R. 2010. Measuring Financial Access. Discussion Paper Economics no. 7. Griffith University. Gold Coast.

  • Asongu S. 2012. Law and finance in Africa. Business and Economic Review 55(4) 385-408.

  • Babajide A. A. Adegboye F. B. and Omankhanlen A. 2015. Financial inclusion and economic growth in Nigeria. International Journal of Economics and Financial Issues 5(3) 629-637.

  • Beck T. and De la Torre A. 2007. The basic analytics of access to financial services. Financial Markets Institutions and Instruments 16(2) 79-117. http://dx.doi.org/10.1111/j.1468-0416.2007.00120.x

  • Beck T. Demirgüç-Kunt A. and Levine R. 2003. Law and finance: Why does legal origin matters? Journal of Comparative Economics 31(4) 653-675. http://dx.doi.org/10.1016/j.jce.2003.08.001

  • Beck T. Demirgüç-Kunt A. and Martinez Peria M. 2007. Reaching out: access to and use of banking services across countries. Journal of Financial Economics 85(1) 234-266.

  • Bhuvana M. and Vasantha S. 2016. Dimensions for measuring financial inclusion in the rural areas of Tamil Nadu. Indian Journal of Science and Technology 9(32) 1-8. http://dx.doi.org/10.17485/ijst/2016/v9i32/98663

  • Boakye C. and Amankwah N. F. 2012. Determinants of the demand for financial products in Ghana. https://www.microfinancegateway.org/sites/default/files/mfg-en-paper-determinants-of-thedemand-for-financial-products-in-ghana-2012.

  • Cámara N. and Tuesta D. 2014. Measuring financial inclusion : A Multidimensional index. BBVA Research Working Paper No. 26. Banco Bilbao Vizcaya Argentaria. Bilbao.

  • Central Bank of Nigeria 2012. Summary Report on Financial Inclusion in Nigeria. http://www.cenbank.org/Out/2012/publications/reports/dfd/CBNSummary%20Report%20ofFinancial%20Inclusion%20in%20Nigeria-final.pdf.

  • Chakravarty S. R. and Pal R. 2010. Measuring financial inclusion : An axiomatic approach. IGIDR Working Paper no. 3. Indira Gandhi Institute of Development Research. Mumbai.

  • Connolly C. and Hajaj K. 2001. Financial services and social exclusion financial services consumer policy centre. https://www.chifley.org.au.

  • Demirgüç-Kunt A. Beck T. and Honohan P. 2008. Finance for all: Policies and pitfalls in expanding. Policy research report. World Bank. Washington DC.

  • Demirgüç-Kunt A. and Klapper L. 2012. Measuring financial inclusion: The global findex database. Policy Research Working Paper no. 6025. World Bank. Washington DC.

  • Demirgüç-Kunt A. Klapper L. and Singer D. 2017. Financial inclusion and inclusive growth: A review of recent empirical evidence in Africa. Policy Research Working Paper no. 8040. World Bank. Washington DC.

  • Demirgüç-Kunt A. Klapper L. Singer D. and Van Oudheusden P. 2015. The global findex database 2014: Measuring financial inclusion around the World. Policy Research Working Paper no. 7255. World Bank. Washington DC.

  • Djankov S. McLiesh C. and Shleifer A. 2007. Private credit in 129 countries. Journal of Financial Economics 84(2) 299-329. http://dx.doi.org/10.1016/j.jfineco.2006.03.004

  • Etudaiye-Muhtar O. F. 2016. The effect of financial market development on capital and debt maturity structure of firms in selected African countries. University of Malaya. Kuala Lumpur.

  • Faruk M. O. and Noman S. 2013. The financial inclusion: A district wise study on Bangladesh. International Journal of Economics. Financial Management 2(4) 291-296.

  • Filippidis I. and Katrakilidis C. 2014. Institutions policy and banking sector development: A reassessment. Czech Journal of Economics and Finance 82(2) 93-208.

  • Fowowe B. 2014. Law and finance revisited: Evidence from African countries. The South African Journal of Economics 82(2) 193-208. http://dx.doi.org/10.1111/saje.12020

  • Fungáčová Z. and Weill L. 2014. Understanding financial inclusion in China. BOFIT Discussion Paper no. 10. Bank of Finland. Finland.

  • Gebrehiwot K. G. and Makina D. 2015. Financial inclusion in selected Asian countries: Evidence using dynamic panel data analysis. http://dx.doi.org/10.2139/ssrn.2636564

  • Goel S. and Sharma R. 2017. Developing financial inclusion index for India. Procedia Computer Science 122 949-956. http://dx.doi.org/10.1016/j.procs.2017.11.459

  • Guièze J. 2014. Financial inclusion in Sub-Saharan Africa. http://economic-research.bnpparibas.com/Views/DisplayPublication.aspx?type=document&IdPdf=24791.

  • Gupte R. Venkataramani B. and Gupta D. 2012. Computation of financial inclusion index for India. Procedia: Social and Behavioral Sciences 37 133-149. http://dx.doi.org/10.1016/j.sbspro.2012.03.281

  • Honohan P. 2008. Cross-country variation in household access to financial services. Journal of Banking & Finance 32(11) 2493-2500. http://dx.doi.org/10.1016/j.jbankfin.2008.05.004

  • Hotelling H. 1933. Analysis of a complex of statistical variables into principal components. Journal of Educational Psychology 24(6) 417-441. http://dx.doi.org/10.1037/h0071325

  • Kankasa-Mabula T. 2012. How can governments promote financial inclusion for women: The Zambian case. Paper presented at the 2nd African women’s economic summit of Bank of Zambia Lagos.

  • Kempson E. Atkinson A. and Pilley O. 2004. Policy level response to financial exclusion in developed economies: lessons for developing countries. Report of Personal Finance Research Centre University of Bristol. http://www.bristol.ac.uk/media-library/sites/geography/migrated/documents/pfrc0409.pdf.

  • Khan H. R. 2012. Issues and challenges in financial inclusion: Policies partnerships processes and products. RBI Monthly Bulletin august 1447–1457.

  • Korynski P. and Pytkowska J. 2016. Measuring financial inclusion in the EU: financial inclusion score approach. https://www.microfinancegateway.org/library/measuring-financial-inclusion-eufinancial-inclusion-score-approach.

  • La Porta R. Lopez-de-Silanes F. Shleifer A. and Vishny R. 1998. Law and finance. Journal of Political Economy 106(6) 1113-1155. http://dx.doi.org/10.1086/250042

  • La Porta R. Lopez-de-Silanes F. Shleifer A. and Vishny R. W. 1997. Legal determinants of external finance. The Journal of Finance 52(3) 1131-1150. http://dx.doi.org/10.1111/j.1540-6261.1997.tb02727.x

  • Laha D. Kuri D. and Kumar P. 2011. Determinants of financial inclusion: A study of some selected districts of West Bengal India. Indian Journal of Finance 5(8) 29-36.

  • Lockwood B. 2004. How robust is the foreign policy-Kearney globalization index? World Economy 27(4) 507-523. http://dx.doi.org/10.1111/j.0378-5920.2004.00611.x

  • M’Amanja D. A. 2015. Financial inclusion regulation and stability: Kenyan experience and perspective. Paper presented at the UNCTAD’s Multi-Year Expert Meeting on Trade Services and Development Geneva Switzerland.

  • Marr A. Leon J. and Ponce F. 2014. Financial inclusion of the poor in Peru: Exploratory factors and determinants. Applied Econometrics and International Development 14(1) 101-300.

  • McKinnon R. I. 1973. Money and capital in economic development. Washington DC: Brookings Institution.

  • Naceur S. B. Barajas A. and Massara A. 2015. Can Islamic banking increase financial inclusion? IMF Working Paper 13. http://dx.doi.org/10.5089/9781498370813.001

  • Okpara G. C. 2013. Developing an index of financial inclusion: An average ratio approach. MPRA Paper No. 49505. Munich University Library. Germany.

  • Onaolapo A. R. 2015. Effect of financial inclusion on economic growth of Nigeria (1982-2012). International Journal of Business and Management Review 3(8) 11-28.

  • Papadavid P. 2016. Broadening financial inclusion in sub-Saharan Africa: policies should prioritise financial stability. https://www.odi.org/sites/odi.org.uk/files/resource-documents/10958.pdf.

  • Park C. and Mercado R. 2018. Financial inclusion: New measurement and cross-country impact assessment: Available at. http://dx.doi.org/10.22617/WPS189270-2

  • Pearson K. 1901. On lines and planes of closest fit to systems of points in space. Philosophical Magazine 2(11) 559-572. http://dx.doi.org/10.1080/14786440109462720

  • Peña X. E. Hoyo C. and Tuesta D. 2014. Determinants of financial inclusion in Mexico. IMF Working Paper No. 235. International Monetary Fund. Washington DC.

  • Sarma M. 2008. Index of financial inclusion. Working Paper no. 215. Indian Council for Research on International Economic Relations. India.

  • Sarma M. 2010. Index of financial inclusion. Discussion Paper no. 10-05. Centre on Money Trade finance and Development. India.

  • Sarma M. 2012. Index of financial inclusion: A measure of financial sector inclusiveness. Working Paper no. 07/2012. Centre on Money Trade finance and Development. India.

  • Sarma M. and Pais J. 2011. Financial inclusion and development. Journal of International Development 23(5) 613-628. http://dx.doi.org/10.1002/jid.1698

  • Sethy S. K. 2016. Developing a financial inclusion index and inclusive growth in India. Theoretical and Applied Economics 23(2) 187-206.

  • Shaw E. 1973. Financial deepening in economic development. New York: Oxford University Press.

  • Shlens J. 2003. A tutorial on principal component analysis: derivation discussion and singular value decomposition. https://www.cs.princeton.edu/picasso/mats/PCA-Tutorial-Intuition_ip.pdf.

  • Sriram M. and Sundaram N. 2015. Financial inclusion index: A customized regional model with reference to economically most backward districts of Tamil Nadu India. Mediterranean Journal of Social Sciences 6(6) 209-216. http://dx.doi.org/10.5901/mjss.2015.v6n6p209

  • Yorulmaz R. 2013. Construction of a regional financial inclusion index in Turkey. Journal of BRSA Banking and Financial Markets 7(1) 79-101.

  • Yorulmaz R. 2018. An analysis of constructing global financial inclusion indices. Borsa Istanbul Review 18(3) 248-258.

  • Zins A. and Weill L. 2016. The determinant of financial inclusion in Africa. Review of Development Finance 6(1) 46-57.

  • Zulaica Piñeyro C. M. 2013. The financial inclusion index: Proposal of a multidimensional measure for Mexico. Revista Mexicana de Economia y Finanzas 8(2) 157-180. http://dx.doi.org/10.21919/remef.v8i2.46

Search
Journal information
Metrics
All Time Past Year Past 30 Days
Abstract Views 0 0 0
Full Text Views 241 241 16
PDF Downloads 300 300 24