Financial Inclusion and GDP Per Capita in Africa: A Bayesian VAR Model

Abstract

Can GDP per capita translate into higher financial inclusion in Africa?  Our application of a Bayesian VAR model to the World Bank Development Indicators datasets for 15 African countries over the period from 2005 to 2014, provides affirmative evidence to this question. The findings show that GDP per capita has significant impacts on financial inclusion, signifying thereby how increases in GDP per capita can be used to drive the needed financial inclusion in Africa. It is, however, interesting to note that financial inclusion has an insignificant but positive impact on GDP per capita. On the other hand, the evidence suggests that broad money, credit supply, literacy, internet users and servers have positive and significant impacts on financial inclusion. Moreover, the internet is coming out to be a significant variable indicating that more attention is required to be paid to developing internet access in Africa for the advancement of financial inclusion. The findings of this study should be of help to African central banks’ policymakers and commercial bankers as they advance innovative approaches to enhance the involvement of excluded poor people in formal finance.

Keywords: Financial inclusion, income, Bayesian VAR