Inclusive Finance, Gender Inequality, and Sustainable Economic Growth in Africa

This study examined the effect of multidimensional inclusive finance index and other financial indicators on gender inequality in 41 countries in Africa from 2000 to 2020 using the two-stage least squares instrumental variable regression (2SLS-IV). Through conditional and unconditional effects, the study established the thresholds and net effect from the interaction between inclusive finance and gender inequality indicators on gross national income per capita (GNI per capita). The thresholds provide the critical masses at which gender inequality level wipes out the positive effect of financial inclusion on the economy. The study showed that the thresholds for gender inequality indicators (CPIA gender inequality, secondary gross enrollment disparity, and tertiary education gross enrollment disparity) are 0.353, 0.098, and 0.091, respectively, for financial inclusion to yield a positive net effect on economic growth in Africa. Based on the critical roles of financial access in the socioeconomic development of African countries, policymakers and international development partners must design policies directed at reducing financial sector participation cost, improving financial intermediation efficiency, and reducing collateral constraints. These policies should not be designed and tailored toward just the rich and privileged few but targeted at women in rural Africa and low- and vulnerable-income groups to achieve inclusive finance for inclusive growth and shared prosperity. State policies and efforts to create equal opportunities for all genders must be fast-tracked.