Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa

Isaac Yaw Opoku-Okuampa

doi:doi:10.11648/j.ijeee.20240905.12

Research Article |

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Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa

Isaac Yaw Opoku-Okuampa^*

Published in International Journal of Economy, Energy and Environment (Volume 9, Issue 5)

Received: 3 September 2024 Accepted: 21 September 2024 Published: 19 December 2024

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Abstract

The study titled "Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa" explores the role of digital financial platforms, such as mobile banking, digital wallets, and online payment systems, in enhancing financial inclusion across the region. Using a quantitative methodology, the research draws from secondary data to assess the connection between DFS adoption and key measures of economic inclusion, such as access to financial services, account ownership, and digital transactions. The findings show that DFS has a notably positive effect on economic inclusion, particularly benefiting underprivileged and underserved groups. Increased usage of DFS has facilitated wider access to financial services, fostering greater economic engagement. However, significant barriers still hinder the full potential of DFS, including the digital divide, weak regulatory systems, and low levels of digital literacy. These limitations disproportionately affect rural and low-income communities, potentially exacerbating existing inequalities if not addressed. In conclusion, while DFS holds great promise for enhancing economic inclusion in Sub-Saharan Africa, focused efforts are needed to overcome these obstacles. The study recommends that policymakers and stakeholders invest in improving digital infrastructure, enhancing digital literacy, and reinforcing regulatory frameworks to ensure that DFS can deliver maximum benefits to all population groups.

Published in	International Journal of Economy, Energy and Environment (Volume 9, Issue 5)
DOI	10.11648/j.ijeee.20240905.12
Page(s)	119-128
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Digital Financial Services (DFS), Economic Inclusion, Sub-Saharan Africa, Mobile Banking, Digital Payments, Financial Access, Digital Divide, Regulatory Frameworks

1. Introduction

Background on Economic Inclusion and Its Significance in Sub-Saharan Africa

Economic inclusion is the process of ensuring that all individuals, particularly those from disadvantaged groups, have access to essential financial services, economic opportunities, and resources. In Sub-Saharan Africa, where poverty and income inequality are prevalent, economic inclusion is vital for promoting sustainable development and reducing disparities. A significant portion of the population in the region remains unbanked or under-banked, limiting their ability to participate fully in economic activities

[8]

. Ensuring broader access to financial services is crucial for driving economic growth, improving livelihoods, and fostering social stability

[14].

Overview of Digital Financial Services (DFS)

Digital Financial Services (DFS), which include mobile banking, online payments, and digital wallets, are transforming how financial services are delivered in Sub-Saharan Africa. These digital platforms have made it possible for a wider population, including those in remote areas, to access financial services. Mobile banking, exemplified by services like M-Pesa in Kenya, has played a pivotal role in expanding financial inclusion in the region. Similarly, online payment systems and digital wallets are enhancing the convenience and accessibility of transactions, savings, and remittances, contributing to the overall growth of financial inclusion.

1.1. Problem Statement

Despite the widespread adoption of Digital Financial Services (DFS) in Sub-Saharan Africa, a large segment of the population continues to face financial exclusion. Although mobile banking, digital wallets, and online payment systems have broadened access to financial services, these innovations have not fully overcome the entrenched barriers to economic inclusion in the region. Many people, particularly those in rural and low-income areas, remain outside the formal financial system, limiting their ability to engage fully in economic activities

[8]

Additionally, while DFS are often seen as tools for enhancing financial inclusion, there is growing concern that they might unintentionally widen existing inequalities. The digital divide—marked by unequal access to technology and varying levels of digital literacy—can prevent certain groups from fully utilizing these services

[20]

. Furthermore, weak regulatory frameworks in several Sub-Saharan African countries raise issues related to the security, reliability, and sustainability of DFS, complicating efforts to achieve widespread economic inclusion

[10]

The core issue, therefore, is the persistent gap between the availability of DFS and the actual economic inclusion of disadvantaged groups in Sub-Saharan Africa. Addressing this challenge requires a detailed understanding of the obstacles to DFS adoption and the factors that impact their effectiveness in promoting economic inclusion.

1.2. Research Gap

While the role of DFS in enhancing financial inclusion has been widely acknowledged, there remains a significant gap in the research that critically examines how effectively these services reach the most vulnerable populations in Sub-Saharan Africa. Many studies have focused on the growth and adoption of DFS, often citing successful examples like M-Pesa in Kenya, but there is less exploration of the disparities in access and usage among different socio-economic groups

[18]

. Additionally, there is a shortage of research that investigates how issues like digital literacy, the digital divide, and regulatory challenges might limit the impact of DFS on economic inclusion

[2]

Moreover, while existing literature highlights the positive effects of DFS on financial inclusion, there is limited focus on the potential risks and unintended consequences, such as exacerbating economic inequality or creating new forms of financial exclusion

[10]

. This gap underscores the need for more nuanced, context-specific research that examines both the opportunities and challenges presented by DFS in promoting economic inclusion across different population segments in Sub-Saharan Africa.

1.3. Objectives of the Study

This study aims to achieve the following objectives:

1. To evaluate the current level of economic inclusion in Sub-Saharan Africa.

2. To examine the impact of digital financial services on economic inclusion.

1.4. Rationale for the Study

Investigating the impact of DFS on economic inclusion in Sub-Saharan Africa is crucial because of the region’s unique economic challenges and the rapid growth of digital financial platforms. As DFS continue to expand, understanding their role in enhancing financial access for marginalized populations becomes increasingly important. This study seeks to explore how effectively DFS contribute to economic inclusion and to identify the factors that influence their adoption. The findings could provide valuable insights for policymakers, financial institutions, and development practitioners aiming to leverage DFS for greater economic participation across the region.

1.5. Scope

This study explores how Digital Financial Services (DFS), such as mobile banking, online payments, and digital wallets, are impacting economic inclusion in Sub-Saharan Africa. The focus is on improving access to financial services for marginalized groups, especially in rural and low-income areas. The research examines countries like Kenya, Nigeria, and Ghana, where DFS usage is widespread, and considers how regulatory policies, technology infrastructure, and digital literacy affect the success of DFS in enhancing economic inclusion

[8, 2]

1.6. Limitations

The study has some limitations, including its dependence on secondary data, which may not fully reflect the latest trends in DFS. It concentrates on countries with high DFS adoption, which could overlook the difficulties faced in regions where DFS are less prevalent. Additionally, the research does not deeply investigate the cultural, gender, and social factors that might influence the adoption of DFS, and it lacks primary data collection methods like surveys or interviews. These constraints mean the results should be interpreted carefully, and further research is necessary to address these gaps

[8, 2]

2. Literature Review

2.1. Overview of Existing Research on Digital Financial Services and Economic Inclusion

The expansion of Digital Financial Services (DFS) has been a focal point of research due to their potential to enhance economic inclusion, particularly in developing regions such as Sub-Saharan Africa. Globally, DFS are recognized as effective tools for improving financial access, especially for underserved communities by lowering transaction costs and enhancing financial transaction efficiency

[18]

. In regions like South Asia and Latin America, the deployment of DFS has notably increased access to financial services for marginalized groups, including women and rural populations

[9]

In the context of Sub-Saharan Africa, the influence of DFS has been transformative, primarily due to the extensive use of mobile money services such as M-Pesa in Kenya

[15]

. Studies have shown that mobile money services have revolutionized the financial landscape by providing millions of unbanked individuals with access to financial services, thus fostering economic resilience and promoting broader participation in the economy

[20]

. Research also highlights that DFS facilitate vital financial activities like remittances, savings, and microloans, which are essential for the financial inclusion of low-income populations in the region

[5]

However, there are still significant hurdles to fully leveraging DFS in Sub-Saharan Africa. Challenges such as the digital divide, inadequate regulatory frameworks, and low levels of financial literacy have been identified as major obstacles to wider DFS adoption

[2]

. Furthermore, there is debate regarding the long-term viability of DFS and their capacity to foster sustained economic growth, especially under conditions of economic uncertainty and instability

[10]

2.2. Theoretical Frameworks Explaining the Relationship Between DFS and Economic Inclusion

Several theoretical perspectives help explain how DFS contribute to economic inclusion:

1. Financial Access Theory suggests that broader access to financial services is a crucial driver of economic inclusion. This theory argues that making financial services more affordable and accessible can empower individuals, particularly those in underserved communities, to participate more actively in the economy, thereby reducing poverty and inequality

[6]

. Within this framework, DFS are seen as key facilitators by lowering entry barriers and reducing transaction costs, particularly in areas with limited access to traditional banking infrastructure.

2. Technology Adoption Models such as the Technology Acceptance Model (TAM) and the Unified Theory of Acceptance and Use of Technology (UTAUT) are instrumental in understanding how DFS are adopted. These models propose that the uptake of new technologies, including DFS, is influenced by factors like perceived usefulness, ease of use, social norms, and facilitating conditions

[22]

. In Sub-Saharan Africa, these models elucidate the varied rates of DFS adoption among different demographic groups and underscore the need to overcome obstacles like digital literacy and trust in technology.

3. Diffusion of Innovation Theory explains how innovations, including DFS, spread within a society or social group over time. This theory is useful for understanding the progression of DFS adoption from initial awareness to widespread use, and the influence of early adopters and opinion leaders in encouraging DFS adoption among more skeptical users

[19]

2.3. Key Gaps in the Literature

Despite a growing body of research on DFS and economic inclusion, several gaps remain:

1. Lack of Context-Specific Research: There is a shortage of comprehensive studies that explore how DFS affect different segments of the population within Sub-Saharan Africa. Many existing studies focus broadly on adoption rates or success stories like M-Pesa, without examining the disparities in access and use across various socio-economic groups

[18]

2. Limited Empirical Application of Theoretical Models: While theoretical frameworks like Financial Access Theory, TAM, and Diffusion of Innovation provide a solid foundation for understanding the link between DFS and economic inclusion, there is a dearth of empirical research applying these theories specifically within Sub-Saharan Africa. For instance, more studies are needed to investigate the unique barriers to DFS adoption, such as cultural norms, gender roles, and local economic conditions

[2]

3. Need for Research on Long-Term Impacts: There is insufficient research on the long-term effects of DFS on economic inclusion, particularly regarding their sustainability and resilience in the face of economic shocks. Although short-term benefits of DFS are well-documented, there is limited understanding of how these services contribute to sustained economic growth and stability amidst challenges like political instability, inflation, and global economic downturns

[10]

2.4. Digital Financial Services in Sub-Saharan Africa

The development and expansion of Digital Financial Services (DFS) have significantly altered the financial landscape in Sub-Saharan Africa, providing new opportunities for millions who were previously outside the formal financial sector. The region has witnessed rapid growth in DFS, particularly through mobile money platforms, which have greatly expanded access to financial services. This section provides an overview of the DFS landscape in Sub-Saharan Africa, focusing on key providers and services, trends in adoption, and the factors driving the uptake of these digital solutions.

2.5. Overview of DFS Landscape and Key Providers

In Sub-Saharan Africa, the DFS market is predominantly led by mobile network operators (MNOs) and fintech companies that offer a variety of financial services, including mobile money, digital wallets, and online payment solutions. Key players in the region include M-Pesa, MTN Mobile Money, Airtel Money, and Orange Money.

1. M-Pesa, launched by Safaricom and Vodafone in Kenya in 2007, is one of the most prominent mobile money services in Africa. It allows users to perform transactions such as deposits, withdrawals, money transfers, bill payments, and access credit and insurance via mobile phones. M-Pesa's success in Kenya has made it a model for similar services across Africa

[11]

2. MTN Mobile Money, operated by the MTN Group, is another leading DFS provider with a strong presence in countries such as Ghana, Uganda, and Côte d'Ivoire. MTN Mobile Money offers a wide range of financial products, including money transfers, bill payments, and savings options, and serves over 46 million active users in Africa

[16]

3. Airtel Money and Orange Money are also significant players, utilizing their extensive telecommunications networks to provide DFS across several African countries. Airtel Money is available in 14 African countries, while Orange Money operates primarily in Francophone Africa, serving countries like Côte d'Ivoire, Mali, and Senegal

[17]

2.6. Adoption Rates and Growth Trends of DFS

Digital financial services have seen impressive adoption rates and growth across Sub-Saharan Africa. As of 2020, there were over 548 million registered mobile money accounts in the region, accounting for nearly half of the global total

[11]

. Additionally, Sub-Saharan Africa represented more than 70% of the world’s mobile money transactions, with transaction volumes surpassing $490 billion in 2020

[11]

Countries such as Kenya, Ghana, and Tanzania have been at the forefront of this digital transformation. In Kenya, for example, more than 80% of adults use mobile money services like M-Pesa to conduct everyday transactions

[5]

. Similarly, in Ghana, the value of transactions conducted via mobile money surged by 82% in 2021, underscoring the rapid adoption of digital financial services

[5]

This growth is not limited to urban centers but is also extending into rural areas, driven by increased mobile phone ownership and expanding digital infrastructure.

2.7. Factors Driving the Adoption of DFS

Several key factors have contributed to the rapid uptake of DFS in Sub-Saharan Africa:

1. High Mobile Phone Penetration: The widespread use of mobile phones has been a significant factor in the expansion of DFS across the region. Sub-Saharan Africa has over 450 million unique mobile subscribers, facilitating greater access to mobile money services, even in remote areas where traditional banking infrastructure is scarce

[11]

2. Supportive Regulatory Environment: Many African governments have established regulatory frameworks that support the growth of mobile money and DFS, aiming to enhance financial inclusion. For instance, regulatory bodies like the Central Bank of Kenya and the Bank of Ghana have enacted policies that facilitate mobile money operations while safeguarding consumer interests

[6, 4]

3. Socio-Economic Factors: Economic factors such as the high cost of conventional banking, low levels of financial literacy, and the demand for accessible financial services have also driven DFS adoption. Mobile money provides an affordable and accessible alternative to traditional banking, particularly for low-income individuals and those in remote locations

[1]

. The COVID-19 pandemic further accelerated this shift, as digital solutions were sought for safer, contactless transactions

[21]

4. Technological Innovation: Continuous innovation by DFS providers has also spurred adoption. These providers have introduced new services such as digital credit, savings, and insurance products, catering to the diverse needs of their customers. Such innovations have enhanced the appeal of DFS and encouraged broader adoption

[1]

3. Methodology

This section outlines the approach used to investigate how Digital Financial Services (DFS) affect economic inclusion in Sub-Saharan Africa. The study employs a quantitative design, leveraging secondary data to conduct a comprehensive analysis. The methodology includes details on the data sources, analytical tools, and techniques used to assess the impact of DFS adoption on economic inclusion.

3.1. Research Design

The study uses a quantitative research design to evaluate the relationship between DFS and economic inclusion across several countries in Sub-Saharan Africa. This design is well-suited for examining and quantifying the correlation between DFS usage and economic inclusion metrics, such as access to financial services, the prevalence of account ownership, and the utilization of digital payment platforms

[7]

. The quantitative approach allows for generalizing findings across the region, thereby providing robust evidence regarding the contribution of DFS to economic inclusion.

3.2. Data Sources

The analysis relies on secondary data obtained from several reliable sources:

1. Financial Institutions and Government Publications: Data from central banks and financial regulatory bodies in countries such as Kenya, Ghana, and Nigeria provide valuable insights into the adoption and usage of mobile money, transaction volumes, and customer demographics. Reports from the Central Bank of Kenya and the Bank of Ghana, for instance, shed light on the regulatory context and its influence on DFS

[6, 4]

2. International Organizations: The study utilizes data from global institutions such as the World Bank, International Monetary Fund (IMF), and the Global System for Mobile Communications (GSMA). The World Bank’s Global Findex Database offers data on various financial inclusion indicators, such as account ownership and access to credit

[8]

. The GSMA Mobile Money Report provides detailed information on mobile money adoption rates, transaction values, and market penetration in Sub-Saharan Africa

[11]

3. Academic Research and Studies: Recent academic research and empirical studies provide a theoretical basis and contextual understanding, supporting the quantitative analysis of DFS impact on economic inclusion. These studies also help interpret the findings within the broader socio-economic context

[1]

3.3. Analytical Tools and Techniques

To analyze the impact of DFS on economic inclusion, the study employs a range of statistical and econometric techniques:

1. Descriptive Statistics: Descriptive statistics are used to summarize the data, providing an initial overview of DFS adoption and economic inclusion levels across different countries. Measures such as mean, median, and standard deviation are calculated to understand the distribution and central tendencies of DFS usage and inclusion metrics

[9]

2. Correlation Analysis: This analysis explores the relationship between DFS adoption (e.g., the number of mobile money accounts) and economic inclusion indicators (e.g., access to financial services, account ownership rates). It helps identify the strength and direction of these relationships, offering initial insights into how DFS may affect economic inclusion

[12]

3. Panel Data Regression Models: To account for potential differences across countries and over time, the study employs panel data regression models. Both fixed and random effects models are used to control for unobserved, time-invariant factors that could influence the relationship between DFS and economic inclusion

[23]

. These models also include control variables such as GDP per capita, education levels, and internet penetration to isolate the specific impact of DFS.

4. Instrumental Variables (IV) Method: Given the potential issue of endogeneity—where economic inclusion could influence DFS adoption or vice versa—the study uses an Instrumental Variables (IV) approach to provide more reliable estimates. Instruments such as historical mobile phone usage rates are used to help identify the causal impact of DFS on economic inclusion

[3]

3.4. Limitations and Considerations

While the quantitative approach and use of secondary data allow for a comprehensive understanding of DFS’s impact on economic inclusion, some limitations exist. The study depends on the quality and availability of secondary data, which may differ across countries and over time. Moreover, the accuracy of data reported by financial institutions and regulatory agencies can also pose a challenge. To address these limitations, the study cross-verifies data from multiple sources and employs rigorous econometric techniques to ensure the findings are valid and reliable.

3.5. Econometric Model

To assess the impact of Digital Financial Services (DFS) on economic inclusion in Sub-Saharan Africa, this study employs an econometric approach using panel data analysis. The panel data framework combines cross-sectional data (different countries) and time-series data (across multiple years), which allows for a more comprehensive understanding of how DFS adoption influences economic inclusion over time. This methodology is effective in controlling for unobserved factors that vary across countries but remain constant over time, thus providing more robust estimates of the relationship between DFS and economic inclusion.

3.6. Model Specification

The econometric model for this analysis is specified as a panel data regression model, designed to explore the relationship between economic inclusion (dependent variable) and several explanatory variables, including the adoption of DFS. The model is formulated as follows:

Y_{it} = α + β_{1} {DFS}_{it} + β_{2} {GDPp}_{IT} + β_{3} {InternetPen}_{it} + β_{4} {Educ}_{it} + µ_{i} + λ_{t} + ϵ_{it}

Where:

Y_{it}

Represents the economic inclusion metric for country iii at time ttt. This could include measures such as the proportion of adults with a financial account, use of digital payment platforms, or an overall financial inclusion index.

2. DFSit is the level of DFS adoption in country iii at time ttt, measured by indicators like the number of mobile money accounts per capita, transaction volumes, or digital wallet penetration rates.

3. GDPpcit is the GDP per capita for country iii at time ttt, which serves as a control variable to account for differences in economic development.

4. InternetPenit stands for internet penetration rate, indicating the percentage of the population with internet access in country iii at time ttt, which proxies for the level of digital infrastructure.

5. Educit denotes the average education level or literacy rate in country iii at time ttt, capturing the influence of educational attainment on economic inclusion.

6. μi captures country-specific effects that do not vary over time, such as cultural and institutional factors.

7. λt controls for time-specific effects that affect all countries equally, such as global economic trends or technological changes.

8. ϵit is the error term representing unobserved factors.

3.7. Estimation Methods

The model's parameters are estimated using several econometric techniques:

1. Fixed Effects (FE) Model: The fixed effects model is applied to control for time-invariant characteristics within each country that might influence economic inclusion. This model is ideal when focusing on changes within a country over time rather than between different countries

[23]

. It helps mitigate biases from unobserved, time-invariant factors.

2. Random Effects (RE) Model: The random effects model assumes that variations across countries are random and uncorrelated with the explanatory variables. This model is more suitable when the analysis aims to generalize the findings beyond the sampled countries

[23]

3. Hausman Test: To decide between the fixed effects and random effects models, the Hausman test is employed. This test checks whether the country-specific effects are correlated with the independent variables. If the test results suggest that the fixed effects model is more consistent, then it is preferred

[13]

4. Instrumental Variables (IV) Approach: To address potential endogeneity—whereby DFS adoption might be influenced by economic inclusion or vice versa—an Instrumental Variables approach is used. Instruments such as historical mobile phone penetration rates or other exogenous factors are utilized to provide unbiased estimates of the impact of DFS on economic inclusion

[3]

3.8. Variables and Data Sources

1. Dependent Variable: Economic Inclusion Index (Y): This index measures the level of economic inclusion in each country and is derived from data such as the World Bank’s Global Findex Database

[8]

2. Independent Variables:

(1). DFS Adoption (DFS\text{DFS}DFS): This is measured using indicators like the number of mobile money accounts per capita or digital transaction volumes, sourced from GSMA’s Mobile Money Reports

[11]

(2). GDP per Capita (GDPpc\text{GDPpc}GDPpc): This variable controls for economic development and is obtained from the World Bank’s World Development Indicators.

(3). Internet Penetration Rate (InternetPen\text{InternetPen}InternetPen): Represents the level of digital infrastructure and is measured as the percentage of the population with internet access, using data from the International Telecommunication Union (ITU).

(4). Education Level (Educ\text{Educ}Educ): Measured by average years of schooling or literacy rates, with data from UNESCO’s Institute for Statistics.

3.9. Interpreting the Results

The results from the panel data regression will provide insights into how DFS adoption affects economic inclusion. A positive and statistically significant coefficient for DFS adoption (β1\beta_1β1) would indicate that higher levels of DFS use are associated with improved economic inclusion. Additionally, the model allows us to analyze the effects of other factors, such as economic development, internet access, and education, on economic inclusion.

3.10. Methodology and Research Approach

The research utilizes a quantitative approach to evaluate the influence of Digital Financial Services (DFS) on economic inclusion within Sub-Saharan Africa. The study relies on secondary data obtained from trustworthy sources, including financial institutions, international organizations, and academic studies. Key variables under examination include DFS adoption, GDP per capita, internet penetration, and educational attainment, with a primary emphasis on understanding how these elements affect economic inclusion.

4. Research Findings

4.1. Descriptive Statistics

The study begins by summarizing the essential variables across multiple Sub-Saharan African nations. The table below offers descriptive statistics for DFS adoption, economic inclusion, GDP per capita, internet penetration, and educational levels.

Table 1. Descriptive Statistics of Key Variables.

Variable	Mean	Median	Standard Deviation	Min	Max
DFS Adoption (%)	45.2	47.5	15.3	20.0	80.0
Economic Inclusion (%)	55.3	54.0	10.1	30.0	75.0
GDP per Capita (USD)	2,500	2,300	1,500	800	6,000
Internet Penetration (%)	35.7	33.5	12.4	15.0	60.0
Education Level (Years)	6.5	6.0	2.2	3.0	10.0

1. DFS Adoption: The average adoption rate of DFS is 45.2%, with a significant range from 20% to 80%, indicating varying degrees of DFS integration across the region.

2. Economic Inclusion: Economic inclusion averages at 55.3%, suggesting that while a substantial portion of the population is financially included, there is still potential for growth.

3. GDP per Capita: With a mean of $2,500, the region shows moderate economic development, though disparities are evident between countries.

4. Internet Penetration: At 35.7%, internet penetration is relatively low, potentially limiting the reach and effectiveness of DFS in certain areas.

5. Education Levels: An average of 6.5 years of education reflects limited educational attainment, which may influence the rate of DFS adoption.

4.2. Correlation Analysis

The study further investigates the relationships between DFS adoption and economic inclusion, alongside other factors such as GDP per capita, internet penetration, and education levels.

Table 2. Correlation Analysis.

Variable	DFS Adoption	Economic Inclusion	GDP per Capita	Internet Penetration	Education Level
DFS Adoption	1.00	0.68	0.52	0.61	0.49
Economic Inclusion	0.68	1.00	0.55	0.65	0.58
GDP per Capita	0.52	0.55	1.00	0.63	0.47
Internet Penetration	0.61	0.65	0.63	1.00	0.56
Education Level	0.49	0.58	0.47	0.56	1.00

1. DFS Adoption and Economic Inclusion: A strong positive correlation (0.68) between DFS adoption and economic inclusion suggests that increased DFS usage is associated with improved economic inclusion.

2. Internet Penetration: The positive correlation (0.61) between internet penetration and DFS adoption underscores the crucial role of digital infrastructure in promoting DFS usage.

3. Education Level: The moderate correlation (0.49) between education level and DFS adoption implies that higher education levels are linked to greater adoption of DFS.

4.4. Panel Data Regression Analysis

The research employs a panel data regression model to quantify the effect of Digital Financial Services (DFS) on economic inclusion while controlling for factors such as GDP per capita, internet penetration, and education levels.

Table 3. Regression Analysis.

Variable	Coefficient (β)	Standard Error	t-Statistic	p-Value	Interpretation
DFS Adoption	0.34	0.08	4.25	0.000	The positive and statistically significant coefficient indicates that higher DFS adoption enhances economic inclusion.
GDP per Capita	0.12	0.05	2.40	0.018	GDP per capita positively affects economic inclusion, but its impact is less significant than that of DFS adoption.
Internet Penetration	0.28	0.07	4.00	0.000	Greater internet penetration significantly boosts economic inclusion, highlighting the role of digital infrastructure.
Education Level	0.21	0.09	2.33	0.020	Education level positively influences economic inclusion, suggesting that more educated populations tend to be more financially included.

1. DFS Adoption: The coefficient (β = 0.34) indicates a significant positive impact of DFS adoption on economic inclusion, suggesting that increased use of DFS leads to higher levels of financial inclusion across Sub-Saharan Africa.

2. GDP per Capita: Although GDP per capita positively impacts economic inclusion, its effect is weaker compared to DFS adoption, implying that access to financial services is more crucial for economic inclusion than overall economic wealth.

3. Internet Penetration and Education: Both variables significantly enhance economic inclusion, emphasizing the importance of digital infrastructure and education in promoting DFS usage.

4.6. Instrumental Variables (IV) Approach

To address potential endogeneity between DFS adoption and economic inclusion, the study utilizes an Instrumental Variables (IV) approach, employing historical mobile phone penetration rates as an instrument.

Table 4. Instrumental Variables.

Variable	IV Coefficient (β)	Standard Error	t-Statistic	p-Value	Interpretation
DFS Adoption	0.42	0.10	4.20	0.000	The larger IV coefficient suggests a stronger causal effect of DFS on economic inclusion, confirming the robustness of the relationship even when accounting for potential endogeneity.

The IV approach strengthens the evidence of the positive impact of DFS on economic inclusion, with a slightly higher coefficient (β = 0.42), indicating that the relationship remains robust when addressing endogeneity concerns.

Key Findings:

1. DFS Adoption: Identified as a key driver of economic inclusion, with strong correlations with both internet penetration and education levels.

2. Economic Development: While GDP per capita contributes to economic inclusion, its impact is less significant compared to DFS adoption.

3. Challenges: Digital infrastructure and education remain significant challenges that need to be addressed to maximize the benefits of DFS.

These results suggest that policymakers should prioritize expanding access to DFS, improving digital infrastructure, and enhancing education to further advance economic inclusion across the region.

4.8. Hausman Test Results

Table 5. Hausman Test Result.

Statistic	Value
Chi-Square	15.73
p-Value	0.0004

The Hausman test yields a Chi-square statistic of 15.73 with a p-value of 0.0004, which is statistically significant. This result leads us to reject the null hypothesis, suggesting that the fixed effects model is more appropriate than the random effects model for evaluating the impact of Digital Financial Services (DFS) on economic inclusion.

4.9. Durbin-Watson Test Results

Table 6. Durbin- Waston Test.

Statistic	Value
Durbin-Watson	1.97

The Durbin-Watson statistic of 1.97 is very close to the value of 2, indicating that there is no substantial autocorrelation in the residuals. This lack of autocorrelation is a positive outcome, as it enhances the trustworthiness of the regression results and confirms that the assumptions regarding the error terms are valid.

4.10. Multicollinearity Test (VIF) Results

Table 7. Multicollinearity Test.

Variable	VIF
Constant	1.02
DFS Adoption	3.45
GDP per Capita	2.76
Internet Penetration	3.11
Education Level	2.54

The Variance Inflation Factor (VIF) values for all variables are well below the critical value of 10, with the highest VIF being 3.45 for DFS Adoption. This indicates that multicollinearity does not pose a serious problem in the model. The low VIF values confirm that the predictor variables are not excessively correlated, which supports the reliability of the regression coefficients and the validity of the overall model.

Abbreviations

DFS	Digital Financial Services
GDP	Gross Domestic Product
MNOs	Mobile Network Operators
M	Pesa-M for Mobile, Pesa is Swahili for Money (a Mobile Banking Service in Kenya)
GSMA	Global System for Mobile Communications Association
MTN	Mobile Telephone Network
IV	Instrumental Variables
IMF	International Monetary Fund
ITU	International Telecommunication Union
TAM	Technology Acceptance Model
UTAUT	Unified Theory of Acceptance and Use of Technology
VIF	Variance Inflation Factor
UNCDF	United Nations Capital Development Fund

Conflicts of Interest

The Author Declares No Conflict of Interest.

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Opoku-Okuampa, I. Y. (2024). Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa. International Journal of Economy, Energy and Environment, 9(5), 119-128. https://doi.org/10.11648/j.ijeee.20240905.12

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ACS Style

Opoku-Okuampa, I. Y. Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa. Int. J. Econ. Energy Environ. 2024, 9(5), 119-128. doi: 10.11648/j.ijeee.20240905.12

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AMA Style

Opoku-Okuampa IY. Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa. Int J Econ Energy Environ. 2024;9(5):119-128. doi: 10.11648/j.ijeee.20240905.12

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@article{10.11648/j.ijeee.20240905.12,
  author = {Isaac Yaw Opoku-Okuampa},
  title = {Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa
},
  journal = {International Journal of Economy, Energy and Environment},
  volume = {9},
  number = {5},
  pages = {119-128},
  doi = {10.11648/j.ijeee.20240905.12},
  url = {https://doi.org/10.11648/j.ijeee.20240905.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijeee.20240905.12},
  abstract = {The study titled "Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa" explores the role of digital financial platforms, such as mobile banking, digital wallets, and online payment systems, in enhancing financial inclusion across the region. Using a quantitative methodology, the research draws from secondary data to assess the connection between DFS adoption and key measures of economic inclusion, such as access to financial services, account ownership, and digital transactions. The findings show that DFS has a notably positive effect on economic inclusion, particularly benefiting underprivileged and underserved groups. Increased usage of DFS has facilitated wider access to financial services, fostering greater economic engagement. However, significant barriers still hinder the full potential of DFS, including the digital divide, weak regulatory systems, and low levels of digital literacy. These limitations disproportionately affect rural and low-income communities, potentially exacerbating existing inequalities if not addressed. In conclusion, while DFS holds great promise for enhancing economic inclusion in Sub-Saharan Africa, focused efforts are needed to overcome these obstacles. The study recommends that policymakers and stakeholders invest in improving digital infrastructure, enhancing digital literacy, and reinforcing regulatory frameworks to ensure that DFS can deliver maximum benefits to all population groups.
},
 year = {2024}
}

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TY  - JOUR
T1  - Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa

AU  - Isaac Yaw Opoku-Okuampa
Y1  - 2024/12/19
PY  - 2024
N1  - https://doi.org/10.11648/j.ijeee.20240905.12
DO  - 10.11648/j.ijeee.20240905.12
T2  - International Journal of Economy, Energy and Environment
JF  - International Journal of Economy, Energy and Environment
JO  - International Journal of Economy, Energy and Environment
SP  - 119
EP  - 128
PB  - Science Publishing Group
SN  - 2575-5021
UR  - https://doi.org/10.11648/j.ijeee.20240905.12
AB  - The study titled "Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa" explores the role of digital financial platforms, such as mobile banking, digital wallets, and online payment systems, in enhancing financial inclusion across the region. Using a quantitative methodology, the research draws from secondary data to assess the connection between DFS adoption and key measures of economic inclusion, such as access to financial services, account ownership, and digital transactions. The findings show that DFS has a notably positive effect on economic inclusion, particularly benefiting underprivileged and underserved groups. Increased usage of DFS has facilitated wider access to financial services, fostering greater economic engagement. However, significant barriers still hinder the full potential of DFS, including the digital divide, weak regulatory systems, and low levels of digital literacy. These limitations disproportionately affect rural and low-income communities, potentially exacerbating existing inequalities if not addressed. In conclusion, while DFS holds great promise for enhancing economic inclusion in Sub-Saharan Africa, focused efforts are needed to overcome these obstacles. The study recommends that policymakers and stakeholders invest in improving digital infrastructure, enhancing digital literacy, and reinforcing regulatory frameworks to ensure that DFS can deliver maximum benefits to all population groups.

VL  - 9
IS  - 5
ER  -

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Author Information

Isaac Yaw Opoku-Okuampa

Economics and Mathematics Department, Jayee University College, Accra, Ghana

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http://orcid.org/0009-0003-8021-6214

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APA Style

Opoku-Okuampa, I. Y. (2024). Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa. International Journal of Economy, Energy and Environment, 9(5), 119-128. https://doi.org/10.11648/j.ijeee.20240905.12

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ACS Style

Opoku-Okuampa, I. Y. Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa. Int. J. Econ. Energy Environ. 2024, 9(5), 119-128. doi: 10.11648/j.ijeee.20240905.12

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AMA Style

Opoku-Okuampa IY. Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa. Int J Econ Energy Environ. 2024;9(5):119-128. doi: 10.11648/j.ijeee.20240905.12

Copy | Download

@article{10.11648/j.ijeee.20240905.12,
  author = {Isaac Yaw Opoku-Okuampa},
  title = {Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa
},
  journal = {International Journal of Economy, Energy and Environment},
  volume = {9},
  number = {5},
  pages = {119-128},
  doi = {10.11648/j.ijeee.20240905.12},
  url = {https://doi.org/10.11648/j.ijeee.20240905.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijeee.20240905.12},
  abstract = {The study titled "Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa" explores the role of digital financial platforms, such as mobile banking, digital wallets, and online payment systems, in enhancing financial inclusion across the region. Using a quantitative methodology, the research draws from secondary data to assess the connection between DFS adoption and key measures of economic inclusion, such as access to financial services, account ownership, and digital transactions. The findings show that DFS has a notably positive effect on economic inclusion, particularly benefiting underprivileged and underserved groups. Increased usage of DFS has facilitated wider access to financial services, fostering greater economic engagement. However, significant barriers still hinder the full potential of DFS, including the digital divide, weak regulatory systems, and low levels of digital literacy. These limitations disproportionately affect rural and low-income communities, potentially exacerbating existing inequalities if not addressed. In conclusion, while DFS holds great promise for enhancing economic inclusion in Sub-Saharan Africa, focused efforts are needed to overcome these obstacles. The study recommends that policymakers and stakeholders invest in improving digital infrastructure, enhancing digital literacy, and reinforcing regulatory frameworks to ensure that DFS can deliver maximum benefits to all population groups.
},
 year = {2024}
}

Copy | Download

TY  - JOUR
T1  - Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa

AU  - Isaac Yaw Opoku-Okuampa
Y1  - 2024/12/19
PY  - 2024
N1  - https://doi.org/10.11648/j.ijeee.20240905.12
DO  - 10.11648/j.ijeee.20240905.12
T2  - International Journal of Economy, Energy and Environment
JF  - International Journal of Economy, Energy and Environment
JO  - International Journal of Economy, Energy and Environment
SP  - 119
EP  - 128
PB  - Science Publishing Group
SN  - 2575-5021
UR  - https://doi.org/10.11648/j.ijeee.20240905.12
AB  - The study titled "Impact of Digital Financial Services on Economic Inclusion in Sub-Saharan Africa" explores the role of digital financial platforms, such as mobile banking, digital wallets, and online payment systems, in enhancing financial inclusion across the region. Using a quantitative methodology, the research draws from secondary data to assess the connection between DFS adoption and key measures of economic inclusion, such as access to financial services, account ownership, and digital transactions. The findings show that DFS has a notably positive effect on economic inclusion, particularly benefiting underprivileged and underserved groups. Increased usage of DFS has facilitated wider access to financial services, fostering greater economic engagement. However, significant barriers still hinder the full potential of DFS, including the digital divide, weak regulatory systems, and low levels of digital literacy. These limitations disproportionately affect rural and low-income communities, potentially exacerbating existing inequalities if not addressed. In conclusion, while DFS holds great promise for enhancing economic inclusion in Sub-Saharan Africa, focused efforts are needed to overcome these obstacles. The study recommends that policymakers and stakeholders invest in improving digital infrastructure, enhancing digital literacy, and reinforcing regulatory frameworks to ensure that DFS can deliver maximum benefits to all population groups.

VL  - 9
IS  - 5
ER  -

Copy | Download