Financial inclusion and financial stability: African countries’ analysis
Year: 2022
Type: dissertation
Abstract: The overall objective of this thesis is to examine the impact of financial inclusion on financial stability. To achieve this objective we conducted four essays, falling within the field of Economics and Finance, with the main focus on financial development and financial stability in African countries. In addition, we used data from countries in other geographic regions, such as European, Asian, and American countries to support and compare the evidence of this study. The first paper conducts a comparative analysis between Sub-Saharan African (SSA) and Latin American and Caribbean (LAC) countries on the causal relationship between financial inclusion and monetary policy, as well as, assesses the impact of financial inclusion on monetary policy. The results provide strong evidence of reverse causality (bidirectional) between financial inclusion and monetary policy in both SSA and LAC countries and show that financial inclusion increases the effectiveness of monetary policy in controlling inflation. The second paper examines the impact of financial literacy and financial inclusion on the performance of African banks and the rest of the world, specifically studying the effect of financial literacy and financial inclusion on credit risk, competitiveness in banking, and financial stability of banks. The results suggest that financial literacy and financial inclusion reduce credit risk and increase bank stability, but the effect of these variables on competitiveness was inconclusive as we found different results for each indicator of competitiveness. The third essay investigates the effect of financial regulation, specifically capital adequacy requirement on banking sector competitiveness and financial inclusion in 15 countries in the SADC region (Southern African Development Community) and 8 countries in SAARC (South Asian Association for Regional Cooperation) during the period 2005-2018. We evidenced that higher regulatory capital requirement reduces competitiveness and stifles financial inclusion programs in the two regions under study. In the fourth essay, the effect of financial inclusion and competitiveness on the financial stability of banks in SSA and LAC countries is studied, considering the moderating role of financial regulation. The results indicate that financial inclusion contributes significantly to the increase of financial stability in SSA and LAC countries, while competitiveness produces negative effects on financial stability, and financial regulation moderates the negative effect of competitiveness on financial stability. As for the practical and policy implication, this thesis awakens policy makers to the need to foster measures that converge to increase financial inclusion in developing countries and in particular in African countries. In fact, the effectiveness of financial inclusion programs, in addition to providing welfare for households by ensuring a safe and formal place to save, make payments and apply for financing, may also contribute to better control prices in the economy, as well as ensure the financial stability of banks.
Author: Jungo, João Fernando
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7047230127