Financial Inclusion and Income Inequality in Sub-Saharan African Countries

ABSTRACT

The general objective of this study is to empirically investigate the relationship between financial inclusion and income inequality in Sub-Saharan African countries. The specific objectives are to determine the effect of the number of bank branches, number of automated teller machines, access to credit, interest rate spread and other variables, point of sales transaction and Gini coefficient in Sub-Sahara Africa. Data covered 2004–2022, thus spanning a period of 19 years. In the context of sub-Saharan Africa, data covered 809 observations; in the sub-regional context, 368 observations were covered in West Africa, 232 in East Africa, 144 in Central Africa, and 54 observations in Southern Africa. The analysis employed descriptive and econometric tools. The study made thorough and implicative findings, and one of the major findings is that private sector access to domestic credits has a statistically significant long-term relationship with income inequality in the regional context of Sub-Saharan Africa, as well as in sub-regional territories like Southern Africa and Eastern Africa but not in Western Africa and Middle Africa; number of automated teller machines Per every 100,000 people has a deterministic impact on income inequality only in Eastern Africa; interest rate spread has a long-run statistically significant relationship with income inequality only in Southern Africa; governmental expenditure affects income inequality in Sub-Saharan Africa but not Middle Africa. Interestingly, the direction of impacts examined is further intriguing to know. The study made numerous recommendations, one of which is on the number of bank branches and income inequality, the recommendation is that regulatory authorities should scrutinize the motive behind the establishment of more bank branches and monitor their activities to ensure best financial service practices.