Assessing Financial Inclusion in 41 African Countries

Many countries have recognized financial inclusion (FI) as a priority for policymaking. Financial inclusion generally has positive welfare effects on the financially excluded segments of society. This paper develops a financial inclusion index for 41 African countries to assess their progress in creating inclusive financial systems. The index covers the period from 2010 to 2019 using three financial inclusion dimensions: access, usage, and availability. The proposed index is easy to compute and provides a helpful tool for tracking progress in financial inclusion. The financial inclusion index will assist in the design of appropriate policy measures aimed at minimizing financial exclusion. The paper finds overall mixed progress in financial inclusion trends among the countries, despite the widely held notion that mobile banking has had a notable impact on financial inclusion in many African countries. Nonetheless, results confirm the significant contribution made by mobile banking. Moreover, the drive for inclusive financial systems is motivated by its perceived benefits on growth and human welfare, which are the focus of the sustainable development goals (SDGs) promoted by the United Nations Development Programme (UNDP).