Financial Inclusion and Foreign Direct Investment in Sub-Saharan Africa

Financial inclusion in Africa has made significant progress over the last decade, largely due to the growth of digital financial services. The economic benefits of this progress are being explored. The objective of this paper is to examine the effect of financial inclusion on foreign direct investment in thirty-two (32) Sub-Saharan African countries over the period 2005 to 2020. The econometric model, is estimated using the Generalised Method of Moments (GMMs) and the Panel-Corrected Standard Error (PCSE) estimator for the robustness test. The results show that financial inclusion has a positive and significant effect on foreign direct investment in the said countries. Indeed, financial inclusion, by facilitating access to financial services for a larger share of the population, has significant positive effects on foreign direct investment (FDI). These results lead us to recommend that government authorities and national and international financial institutions improve access to financial services and strengthen financial reforms aimed at increasing the level of financial inclusion in order to continue to attract more FDI flows.