Digital Financial Development and Financial Inclusion in West Africa: Evidence from Panel Data

Financial inclusion in developing economies remains uneven despite rapid digital and financial sector expansion, raising questions about the effectiveness of traditional and emerging drivers of inclusive access. This study investigates the determinants of financial inclusion in West Africa using panel data over a 15-year period. It examines the roles of information and communication technology (ICT), financial sector development, income, inflation, education, mobile penetration, and rural population dynamics across multiple dimensions of inclusion. Employing fixed and random effects models, alongside Driscoll–Kraay standard errors to address cross-sectional dependence and heteroskedasticity, the analysis ensures robust inference. Hausman test results consistently favour the fixed effects specification, indicating the importance of country-specific heterogeneity. The findings reveal that ICT and digital finance indicators are the most consistent and robust drivers of financial inclusion, underscoring the central role of digital infrastructure in expanding access. Economic development, proxied by GDP per capita, also exerts a significant positive effect. In contrast, traditional banking development indicators exhibit mixed and often insignificant impacts, suggesting structural limitations in conventional financial systems. Education shows an unstable or negative relationship, implying that human capital alone does not guarantee financial inclusion without supporting institutional frameworks. Rural population remains a persistent constraint, while mobile penetration yields mixed results across specifications. Overall, the study highlights the dominance of digital financial channels over traditional banking mechanisms, alongside enduring structural inequalities. Policy implications emphasise scaling digital infrastructure, deepening rural financial access, and strengthening institutional effectiveness to achieve inclusive financial development.