Financial inclusion and human development within the member states of the West African Economic and Monetary Union (WAEMU): a two-way analysis

This research is testing bidirectional relationship between financial inclusion and human development by monitoring the role of institutional quality within the West African Economic and Monetary Union countries (WAEMU). To achieve this, the panel data fixed effects method is used from 2010 to 2022, covering eight WAEMU countries. The findings show that an effective use of financial products and services, notably credit and savings, improves human development (life expectancy, schooling and income). Besides, the effect is enhanced when institutional quality plays a role in the relationship between financial inclusion and human development, and the causality test reveals a two-way link between financial inclusion and human development. It also appears that the combined effect of improved regulation and private credit leads to an increase in life expectancy at birth from 0.267 to 0.324 years and income from $27.5 to $49.03. Furthermore, the interactive effect between institutional quality and per capita savings increases income from $2.398 to $2.541. The outcome suggests that players in the financial ecosystem should do more to strengthen the supply of credit and provide households and businesses with adequate savings products to develop income-generating activities, enabling them to adequately meet their needs. This must be done through a quality institutional environment.