Financial Inclusion, Income Inequality and Sustainable Economic Growth in Sub-Saharan African Countries

Abstract

This study evaluates the relevance of inclusive financial access in moderating the effect of income inequality on economic growth in 48 countries in Sub-Saharan Africa (SSA) for the period 1995 to 2017. The findings using the Generalised Method of Moments (sys-GMM) technique show that inclusive financial access contributes to reducing inequality in the short run, contrary to the Kuznets curve. The result reveals a negative effect of financial access on the relationship between income inequality and economic growth. There is a positive net effect of inclusive financial access in moderating the impact of income inequality on economic growth. Given the need to achieve the Sustainable Development Targets in the sub-region, policymakers and other stakeholders of the economy must design policies and programmes that would enhance access to financial services as an essential mechanism to reduce income disparity and enhance sustainable economic growth.

The Relevance of Financial Inclusion on Sustainable Economic Growth in Sub-Saharan African Nations

“…Good monetary facilities promote economic development through attracting savings for constructive investment, effective distribution of funds and risk management. This result is in tandem with academic literature supporting the assumption that inclusive financial accessibility strategies can boost inclusive growth and development [26,27,46,59,[63][64][65]. These outcomes are in tandem with the inferences concluded in [26] that finance inclusive access has a complementary effect on growth in an economy due to its mitigating tendency of earnings disparity in the sub-region.…”

“…This result is in tandem with academic literature supporting the assumption that inclusive financial accessibility strategies can boost inclusive growth and development [26,27,46,59,[63][64][65]. These outcomes are in tandem with the inferences concluded in [26] that finance inclusive access has a complementary effect on growth in an economy due to its mitigating tendency of earnings disparity in the sub-region. Consequently, this affirmed the contentions of Rajan [106], which make express reference to the way that widespread accessibility to services and products from insurance, savings funds and other money-related products would lessen the income fragility of poor people.…”

“…By reflecting on accessibility in SSA countries, this article subscribes to the developing body of research on inclusive financing, as scholars such as [25] has termed the SSA region as the region with low inclusive financing. However, [26] found that finance inclusive access has the ability to mitigate earnings disparity in the sub-region. Our principal literature inputs are three-fold.…”

The level of financial inclusion in Ukraine: Measuring access, quality, and usage of financial products and services

“…The authors admit that high-income and developed countries have the highest level of financial inclusion, which "leads to a comparatively higher likelihood of increasing GDP growth and lowering multi-dimensional poverty, and a higher female workforce participation for the countries having lowest and medium levels of financial inclusion" (Mukherjee & Sood, 2020, p. 985). Likewise, Menyelim et al (2021) show that financial inclusion contributes to reducing inequality, and hence "financially less developed economies stand to earn the most significant growth and equity gains from financial development" (Menyelim et al, 2021, p. 13).…”

Inclusive finance, industrial structure upgrading and farmers’ income: Empirical analysis based on provincial panel data in China

“…The micro mechanism shows that inclusive finance influences residents’ poverty reduction and income increase through consumption smoothing effect, career choice effect, human capital investment effect and risk management effect [ 16 , 17 ]. By contrast, the macro mechanism is through economic growth effect, income distribution effect and industrial diffusion effect [ 18 – 20 ]. Further, relevant scholars have focused on how inclusive finance should transform the credit support mechanism, so as to better promote the sustainable development of rural economy and the sustained increase of farmers’ income.…”