Digital Financial Inclusion and Sustainable Development in Africa: The Role of Governance

This paper examines whether the relationship between digital financial inclusion and sustainable development depends on governance quality, using an unbalanced panel of 34 African countries over 2010 to 2024. We construct a digital financial inclusion index by principal component analysis from IMF Financial Access Survey mobile-money indicators and estimate two-way fixed-effects models interacting the index with each of the six Worldwide Governance Indicators dimensions. Two main findings emerge. First, the interaction between digital financial inclusion and governance is positive across all six dimensions, and the marginal effect of digital finance on SDG performance rises steadily with governance quality while remaining negligible where governance is weak. Second, this moderating effect is strongest for political stability, the rule of law, and regulatory quality, particularly when digital financial inclusion enters with a one-period lag, consistent with a gradual transmission of its benefits over time. Digital finance and governance thus emerge as complements, and expanding access alone does not generate systematic sustainability gains. Policies expanding digital financial access are therefore most likely to advance the Sustainable Development Goals when embedded in broader institutional reforms.