Financial inclusion and economic growth in SSA-Assessing the role of digital technology

Abstract

This study assesses how financial inclusion and digital financial services (DFS) jointly influence economic growth in Sub-Saharan Africa (SSA), with particular attention to whether and how DFS moderates the growth impact of financial inclusion. Using panel data for 27 SSA countries over 2010–2024, the research constructs composite indices for financial inclusion and DFS via Principal Component Analysis (PCA) and applies the two-step System Generalized Method of Moments (SGMM) to address dynamic relationships, endogeneity, and country heterogeneity. The theoretical foundation integrates the Technology Acceptance Model, Diffusion of Innovation, Financial Intermediation Theory, and Endogenous Growth Theory to link user adoption, technological diffusion, intermediation efficiency, and long-run growth. Empirical results show that both financial inclusion and DFS exert statistically significant positive effects on GDP per capita growth. Importantly, DFS strengthens (positively moderates) the relationship between financial inclusion and economic growth: countries with higher levels of DFS adoption obtain larger growth dividends from improvements in financial inclusion. Robustness checks, including alternative estimators and specification tests, confirm the stability of these findings. The study concludes that policy efforts to promote inclusive growth in SSA should pursue coordinated strategies that expand formal financial access while simultaneously investing in resilient digital infrastructure, consumer digital literacy, and supportive regulation for fintech. Targeted measures such as extending digital payment networks to underserved areas, promoting interoperable systems, and integrating DFS into national financial inclusion strategies can maximize the developmental benefits of financial inclusion in the digital era.