The role of finance in inclusive human development in Africa revisited

Abstract

Purpose

This study aims to investigate the direct and indirect linkages between financial development and inclusive human development in African countries.

Design/methodology/approach

The study employs a battery of estimation techniques, notably: two-stage least squares, fixed effects, generalized method of moments and Tobit regressions. The dependent variable is the inequality adjusted human development index. All dimensions of the Financial Development and Structure Database of the World Bank are considered.

Findings

The main finding is that financial dynamics of depth, activity and size improve inclusive human development, whereas the inability of banks to transform mobilized deposits into credit for financial access negatively affects inclusive human development.

Practical implications

Policies should be tailored to improve mechanisms by which credit facilities can be provided to both households and business operators. Surplus liquidity issues resulting from the inability of banks to transform mobilized deposits into credit can be resolved by enhancing the introduction of information sharing offices (like public credit registries and private credit bureaus) that would reduce information asymmetry between lenders and borrowers.

Originality/value

This study complements the extant literature by assessing the nexus between financial development and inclusive human development in Africa.

Citation

Asongu, S. and Nting, R. (2022), "The role of finance in inclusive human development in Africa revisited", Journal of Economic and Administrative Sciences, Vol. 38 No. 2, pp. 345-370. https://doi.org/10.1108/JEAS-07-2020-0138