Financial technology and financial inclusion in Africa

Abstract This paper examines the effect of financial technology (FINTECH) on financial inclusion in 36 African countries for 2011, 2014 and 2017 in a two-stage analysis. In the first stage, data on access, usage and availability of financial services is employed to compute financial inclusion index (FII) using the Principal Component Analysis. In the second stage, a panel data regression model is estimated using the fixed and random effects techniques to examine the effect of proxies of financial technology of the FII. The findings suggests that the sample is characterized by low levels of financial inclusion. From the panel regression analysis, FINTECH is observed to have a positive effect on financial inclusion. Specifically, the use of mobile accounts is observed to have the greatest impact on financial inclusion compared to the use of digital payments from traditional bank accounts. The policy implications of the findings are discussed.