Addressing Socioeconomic Challenges in Sub-Saharan Africa: Insights from the Financial Inclusion, Institutional Quality, and Economic Growth Nexus

The growing concern over socioeconomic challenges in developing economies has intensified scholarly attention on how financial inclusion and institutional quality interact to influence economic growth in Sub-Saharan Africa. Despite extensive literature on finance-growth and institutions-growth relationships, limited empirical studies simultaneously examine how financial inclusion and institutional quality jointly address socioeconomic challenges within the Sub-Saharan African context using recent panel data and robust dynamic estimation techniques. Therefore, this study investigates the extent to which financial inclusion and institutional quality influence economic growth in selected Sub-Saharan African economies. The analysis is based on annual statistical data covering 20 Sub-Saharan African countries for 2008–2024. The empirical analysis employs descriptive statistics and the two-step system generalized method of moments (system GMM) estimation technique to address potential endogeneity and dynamic relationships. The results reveal that financial inclusion exerts a positive and statistically significant effect on economic growth when measured by real GDP, indicating that greater access to financial services stimulates productive economic activities in the region. Furthermore, institutional quality demonstrates a positive and significant relationship with GDP growth rate and per capita real GDP, suggesting that improvements in governance structures enhance economic performance across the sampled economies. However, when economic growth is proxied by real GDP, institutional quality shows a negative but statistically significant coefficient of about 0.18, highlighting the complex and heterogeneous institutional dynamics within Sub-Saharan African economies. Additionally, the analysis indicates that the COVID-19 pandemic significantly reduced GDP growth and per capita real GDP, with a negative mean difference exceeding 2.5 percentage points between pre- and post-pandemic periods, confirming the vulnerability of regional economic performance to global shocks. These findings provide important policy insights and open new avenues for research and policy design aimed at addressing socio-economic challenges through improved financial inclusion strategies and stronger institutional frameworks in Sub-Saharan Africa.