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Can financial inclusion reduce the presence of corruption? Evidence from selected countries in Africa

Author

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  • Folorunsho M. Ajide

Abstract

Purpose - The purpose of this paper is to evaluate the impact of financial inclusion (FI) on control of corruption in selected African countries. Design/methodology/approach - The study employs secondary data spanning over a period of 2005–2016. These data are sourced from IMF's International Financial Statistics, World Bank Development Indicators, Global Financial Development Database, Transparency International and International Country Risk Guide. The author usesSarma (2008)approach to construct the FI index for 13 countries in Africa. The author applies random effect, robust least square and instrumental variable (IV) estimations to examine the impact of FI on control of corruption in Africa. Findings - The author finds that financial inclusion improves the control of corruption. The author tests for possible FI threshold to avoid the case of extreme FI in Africa. The results show that there is a threshold level if reached, FI would have negative impacts in the control of corruption. This may likely happen mainly due to weak institutions in Africa. The results are robust to alternative proxy for control of corruption and various alternative estimation techniques. Practical implications - The finding indicates that FI can serve as part of toolkits for reducing corruption in Africa. Originality/value - This study stresses the important role of FI in the economic system. It is the first paper that empirically suggests the role of FI in controlling corruption in Africa.

Suggested Citation

  • Folorunsho M. Ajide, 2020. "Can financial inclusion reduce the presence of corruption? Evidence from selected countries in Africa," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 47(11), pages 1345-1362, October.
    • Handle: RePEc:eme:ijsepp:ijse-03-2020-0145
    DOI: 10.1108/IJSE-03-2020-0145
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    Citations

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    Cited by:

    1. João Jungo & Mara Madaleno & Anabela Botelho, 2024. "Financial Literacy, Financial Innovation, and Financial Inclusion as Mitigating Factors of the Adverse Effect of Corruption on Banking Stability Indicators," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 8842-8873, June.
    2. Rajesh Barik & Sanjaya Kumar Lenka, 2023. "Does financial inclusion control corruption in upper-middle and lower-middle income countries?," Asia-Pacific Journal of Regional Science, Springer, vol. 7(1), pages 69-92, March.
    3. Isaac Ofoeda & Elikplimi Komla Agbloyor & Joshua Yindenaba Abor & Kofi Osei Achampong, 2022. "Foreign direct investment, anti‐money laundering regulations and economic growth," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(3), pages 670-692, April.

    More about this item

    Keywords

    Corruption; Financial inclusion; Random effect; Africa; D730; G21; G290; O550;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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