Bridging the divide : the impact of financial inclusion on income inequality in Africa

Abstract

The study empirically investigates the impact of financial inclusion on income inequality across 25 African countries from 2006 to 2022. Promoting financial inclusion has become a core strategy for economic development in emerging economies, focusing on advancing access for low-income households and small businesses. The existing literature suggests that such efforts yield various benefits for economic and financial development, which, in turn, may reduce income inequality. This potential link raises an important question: Does the movement toward greater financial inclusion effectively reduce income inequality? Empirical research examining the link between financial inclusion and income inequality is important, particularly in Africa, a developing region with high income inequality. Therefore, this study investigates the effect of financial inclusion – measured by access, penetration and usage dimensions and an overall index – on income inequality using the two-step system Generalised Method of Moments (GMM), and the Quantile Regression testing techniques. The findings indicate that access to financial services and products, their penetration, and the financial inclusion index reduce income inequality, particularly in countries at medium to high quantiles of the income inequality distribution, while it increases it at lower quantiles. Policy makers should implement policies that expand access to and penetration of formal financial services and products, and complement financial inclusion efforts with measures to reduce wealth gaps. In contrast, the findings show that the use of financial services and products increases income inequality, particularly in countries at medium to high quantiles of the income inequality distribution, while reducing it at lower quantiles. This suggests that financial use, in terms of credit and savings, tends to widen rather than reduce income inequality, benefitting those already financially included, while disadvantaged groups remain excluded. Policymakers should implement policies that promote income-generating activities and improve the earning capacity of disadvantaged populations before promoting this form of financial use. They should also promote more accessible alternative forms of financial use, such as digital payment systems and internet banking, to reduce barriers for small businesses and low-income groups. Furthermore, policymakers should pursue financial education initiatives to enable poor people to use these digital financial services and products effectively.

Kwenziwe uphando ngokwamava xa kuphandwa impembelelo yokufikelela okuqukayo emalini kumba wokungalingani kwemivuzo kumazwe angama-25 elizwekazi iAfrika ukususela kunyaka wama-2006 ukuya kuthi ga kowama-2022. Ukuqhubela phambili ukufikelela okuqukayo emalini sisicwangciso esingundoqo sophuhliso loqoqosho lwamazwe anoqoqosho olusakhasayo kwaye sijolise ekubeni siphucule ukufikelela kwamakhaya anemivuzo emincinane kunye namashishini amancinane. Uncwadi olukhoyo lubalula ukuba iinzame ezilolu hlobo zinceda ngeendlela ezahlukeneyo kuphuhliso loqoqosho nolwemali, kwaye oku kunokuwucutha umsantsa wokungalingani kwemivuzo. Olu nxulumano olunokwenzeka luvusa umbuzo obalulekileyo: Ingaba ukufikelela okuqukayo emalini kuyawucutha ngokwenene na umsantsa wokungalingani kwemivuzo? Lubalulekile uphando ngokwamava oluhlola unxulumano phakathi kokufikelela okuqukayo emalini kunye nomsantsa wokungalingani kwemivuzo, ingakumbi kwilizwekazi iAfrika eliyingingqi esakhasayo enowona msantsa mkhulu wokungalingani kwemivuzo. Olu phando luphengulula isiphumo sokufikelela okuqukayo emalini – silinganiswa ngemilinganiselo yokufikeleleka, eyokungena neyokusetyenziswa nangesalathisi ngokubanzi – kumsantsa wokungalingani kwemivuzo lusebenzisa inkqubo emanyathelo amabini iGeneralised Method of Moments (GMM), kunye neendlela zokuhlola iQuantile Regression. Iziphumo zobonise ukuba ukufikelela kwiinkonzo nakwiimveliso zemali, ukungena kuzo kunye nesalathisi sokufikelela okuqukayo emalini ngokubanzi kuyawucutha umsantsa wokungalingani kwemivuzo, ingakumbi kumazwe akumanqanaba aphakathi ukusa kwaphezulu okungalingani kwemivuzo, ukanti kuyawunyusa kumazwe akumanqanaba asezantsi. Kufuneka abaqulunqi bemigaqo-nkqubo bamilisele imigaqo-nkqubo eyandisa ukufikeleleka nokungena kwiinkonzo neemveliso zemali ezisesikweni kwaye bawunciphise umsantsa wobutyebi besebenzisa ukufikelela okuqukayo emalini. Iziphumo zichasene noku kuba zona zibonisa ukuba ukusebenzisa iinkonzo neemveliso zemali kuyakwandisa ukungalingani kwemivuzo, ingakumbi kumazwe akumanqanaba aphakathi naphezulu ngokwemivuzo engalinganiyo, ukanti kumazwe akumanqanaba asezantsi okungalingani kwemivuzo oku kuyakunciphisa ukungalingani kwemivuzo. Oku kuxela ukuba ukusebenzisa imali ngamatyala nangokulondoloza imali kuyakwandisa ukungalingani kwemivuzo endaweni yokokuba kukunciphise kwaye kunceda abo asele bequkiwe emalini lo gama beqhubeka nokusala ngaphandle abo bangathathi ntweni. Phambi kokuba abaqulunqi bemigaqo-nkqubo baqhubele phambili olu hlobo lokusetyenziswa kwemali kufuneka bamilisele imigaqo-nkqubo ekhuthaza ukwenziwa kwezinto ezingenisa umvuzo neziphucula ubuchule bokungenisa imali ebantwini abahlelelekileyo. Kufuneka baqhubele phambili iindlela ezizezinye ezifikelelekayo zokusebenzisa imali ezifana neenkqubo zokuhlawula ngedijithali nokubhanka ngeintanethi ukuze kuguzulwe imiqobo ethintela amashishini amancinane kunye nabantu abamkela imivuzo emincinane. Ngaphaya koko, kufuneka abaqulunqi bemigaqo-nkqubo benze amaphulo okufundisa ngemali ngelincedisa abantu abahlelelekileyo ukuze bakwazi ukusebenzisa ezi nkonzo neemveliso zemali zedijithali ngokukuko.

Die studie ondersoek empiries die impak van finansiële insluiting op inkomste-ongelykheid in 25 Afrikalande van 2006 tot 2022. Die bevordering van finansiële insluiting het ʼn kernstrategie vir ekonomiese ontwikkeling in ontluikende ekonomieë geword, met die fokus op die bevordering van toegang vir lae-inkomste huishoudings en klein besighede. Die bestaande literatuur dui daarop dat sulke pogings verskeie voordele vir ekonomiese en finansiële ontwikkeling inhou, wat weer inkomste-ongelykheid kan verminder. Hierdie potensiële skakel laat ʼn belangrike vraag ontstaan: Verminder die beweging na groter finansiële insluiting inkomste-ongelykheid effektief? Empiriese navorsing wat die verband tussen finansiële insluiting en inkomste-ongelykheid ondersoek, is belangrik, veral in Afrika, ʼn ontwikkelende streek met hoë inkomste-ongelykheid. Hierdie studie ondersoek dus die uitwerking van finansiële insluiting – gemeet aan toegang-, penetrasie- en gebruiksdimensies en ʼn algehele indeks – op inkomste-ongelykheid met behulp van die tweestap-stelsel algemene metode van momente (AMM) en die kwantielregressie-toetstegnieke. Die bevindinge dui daarop dat toegang tot finansiële dienste en produkte, die penetrasie en die algehele finansiële insluitingsindeks inkomste-ongelykheid verminder, veral in lande met medium tot hoë kwantiele van die inkomste-ongelykheidsverspreiding, terwyl dit met laer kwantiele verhoog. Beleidsmakers behoort beleid te implementeer wat toegang tot en penetrasie van formele finansiële dienste en produkte uitbrei en finansiële insluitingspogings met maatreëls aanvul om welvaartgapings te verminder. In teenstelling hiermee toon die bevindinge dat die gebruik van finansiële dienste en produkte inkomste-ongelykheid verhoog, veral in lande met medium tot hoë kwantiele van die inkomste-ongelykheidsverspreiding, terwyl dit by laer kwantiele verminder. Dit dui daarop dat finansiële gebruik, in terme van krediet en spaargeld, geneig is om inkomste-ongelykheid te verbreed eerder as te verminder, wat diegene wat reeds finansieel ingesluit is, bevoordeel, terwyl benadeelde groepe uitgesluit bly. Beleidsmakers behoort beleid te implementeer wat inkomste-genererende aktiwiteite bevorder en die verdienvermoë van benadeelde bevolkings verbeter voordat hulle hierdie vorm van finansiële gebruik bevorder. Hulle behoort ook meer toeganklike alternatiewe vorme van finansiële gebruik, soos digitale betaalstelsels en internetbankdienste, te bevorder om versperrings vir klein besighede en lae-inkomstegroepe te verminder. Verder behoort beleidsmakers finansiële opvoedingsinisiatiewe na te streef om arm mense in staat te stel om hierdie digitale finansiële dienste en produkte effektief te gebruik