Do financial inclusion and income inequality matter for human capital? Evidence from sub-Saharan economies

Sub-Saharan African (SSA) countries are struggling as they have a lower level of human capital than developed countries. These economies are also trying to develop their financial sector with improved products and services. The main cause of their slow development in this region is income disparity. In view of this potential problem, this study examines the impact of financial inclusion and income inequality on human capital in SSA countries. To test this, we use panel data from 36 SSA from 2004 to 2019. Controlling for other economic indicators, we find that a high level of financial inclusion and a reduction in income inequality improve human capital. Then, we test this association separately for the dimension of financial inclusion. Afterward, our study uses the GMM technique to address endogeneity concerns. Additional tests confirm that our results are robust when SSA economies have a high level of education. Copyright (c) 2022 Borsa Istanbul Anonim S, irketi. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

Automated summary

SSA countries in Sub-Saharan Africa are facing challenges due to lower levels of human capital compared to developed countries. They are also striving to develop their financial sectors by offering improved products and services. This study examines the impact of financial inclusion and income inequality on human capital in SSA countries and finds that higher financial inclusion and reduced income inequality have a positive effect. The study uses panel data from 36 SSA countries from 2004 to 2019, controlling for other economic indicators, and confirms the robustness of the results when SSA economies have a high level of education.