Understanding Financial Inclusion in Africa: A Multidimensional Banking–Insurance Index and its Key Influencing Factors (International Journal of Economics and Financial Issues)

Summary

• The study builds a financial inclusion index (FII) from banking and insurance data for 14 African countries over 2000-2021.p.1
• Sierra Leone recorded an average FII of 0.30, while all other countries had averages below 0.30.p.1
• The average FII across the sample is 0.24, with a standard deviation of 0.13.p.10
• FII ranges from a minimum of 0.003 to a maximum of 0.45.p.10
• Madagascar, Rwanda and Congo DR show the lowest inclusion, with FII values below 0.20.p.10
• GNI per capita has a significant positive long-run coefficient of 2.028561.p.11
• Inflation is positively related to financial inclusion, with a one-percentage-point rise linked to approximately a 0.8% rise in inclusion.p.12

Key insights

1. The index was constructed with Principal Component Analysis using data from 2000 to 2021.p.12
2. Inflation has a positive and statistically significant long-run relationship with financial inclusion at the 1% level.p.12
3. The dependency ratio has an insignificant short-run effect on financial inclusion even at the 10% level.p.11
4. Education has an insignificant effect on financial inclusion in the short run.p.12
5. Credit extended to the private sector does not play a decisive role in enhancing financial inclusion in the region.p.12
6. A study of 1,000 adults in Ghana found that lack of proper documentation was a significant barrier to inclusion.p.6