Digital Inclusion and Financial Sector Growth in Selected African Countries

Many countries, including African nations, are now embracing to modern technology and digitalisation of their economies through internet resources. This study seeks to determine whether digital inclusion contributes to the growth of financial system in African countries by examining both money and capital market variables. The study obtains data from World Bank Development Indicators and the international Monetary Fund database for 8 African countries accross the four regional blocks from 2000 to 2022. The FMOLS technique is employed to perform multiple regressions of financial sector variables on digital inclusion variables. Findings indicate that the proportion of internet users has positive and significant effect on commercial bank branch expansion in the money market and market capitalisation in the capital market. Mobile cellular subscriptions are also found to have apositive and significant effect on commercial bank branch expansion and stock traded. Additionally, the deposit interest rate has positive and significant effect on credit to private sector in the money market and market capitalisation in the capital market, while it is insignificant effect on commercial bank branch expansion and stock traded in the stock exchange. The study recommends that digital infrastructure should be upgraded in African countries to meet global requirements in order to maximise financial sector’s potential benefits from worldwide digitalisation and technological transformation.