Non-Linear Effect of Financial Inclusion on Economic Growth in Sub-Saharan Africa: The Role of Bank Competition

The aim of this paper is to examine the effects of bank competition and financial inclusion on economic growth. It employs dynamic system GMM estimations using data for thirty-one (31) sub-Saharan African countries over the period 2004–2021. Several findings emerge from the estimations. On the one hand, financial inclusion through deposits, accounts, and branch density positively and significantly affects economic growth in the region. Moreover, bank competition (Boone indicator and concentration ratio) has significant effects on economic growth. On the other hand, the growth impact of financial inclusion depends on the degree of bank competition. There is an inverted U-shape relationship between financial inclusion and economic growth in sub-Saharan Africa. Therefore, for inclusive financial systems, an intermediate degree of concentration along with some market power would enhance the growth impact of banking characteristics in sub-Saharan Africa.