FINANCIAL INCLUSION: A CAUSAL DRIVER OF EARNINGS CAPACITY IN WEST AFRICA
Abstract
Financial inclusion analyses in sub-Saharan Africa have traditionally focused on single-country studies. However, the current study seeks to undertake theoretical and empirical discussions on financial inclusion as a causal driver of earnings capacity in a panel of 15 West African countries covering the period 2011-2018. In the light of data constraints, we investigate whether bank loans, deposit accounts, mobile money transactions,s and bank branches foster per capita income; while population size is a control variable. We utilized cultural factors to investigate cross-country differences. Data were extracted from World Development Indicators and United Nations Development Programme. The study employs spectra of estimation techniques, namely: Pooled Least Square, Random Effects, and Fixed Effects. However, the Hausman model identification test indicates the data to be plausibly described by Fixed Effect. From the regression, specific findings are established: First, a bank loan is apparently positive and significant. Second, whereas population size is overwhelmingly negative and significant; bank branches, deposit accounts, and mobile money are positive and insignificant across models. Third, on cultural effects from interaction with regressors, Portuguese-speaking countries completely record adverse cultural effects than their Anglo-Francophone counterparts, although apparent within-entity differences are present. Fourth, there is consistent evidence of extensive margin theory and regional financial market integration. Collectively, findings show evidence of a positive relationship between financial inclusion and per capita income. In conclusion financial inclusion causally drives per capita income in the sub-region.
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