Digital Finance, Entrepreneurship, and Poverty in Africa

Digital finance has the potential to accelerate progress toward SDG 1, which seeks to end poverty in all its forms and dimensions by 2030. Previous studies have delved into the effects of digital finance on poverty, however, there is a dearth of empirical studies that have specifically explored both the direct effects and the mechanism through which digital finance impacts poverty. This study, therefore, aimed to analyze how digital finance affects poverty and the underlying transmission mechanism by using panel data spanning from 2004 to 2019, covering 41 African countries. By employing the system-generalized method of moments technique to address endogeneity concerns, the study provides compelling evidence that digital finance significantly contributes to poverty reduction, regardless of gender and age cohorts. The empirical results also suggest that access to credit and its use in entrepreneurial activities are prerequisites for digital finance to reduce poverty.