DIGITAL FINANCE, FINANCIAL INCLUSION AND ECONOMIC GROWTH NEXUS IN COMESA: THE ROLE OF REGULATORY QUALITY, RULE OF LAW AND GOVERNMENT EFFECTIVENESS
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Abstract
This study examined the roles of digital finance and financial inclusion in the economic growth process of nineteen COMESA member states using annual time series data from 1997 to 2018. Using the panel ARDL framework, the study found that digital finance and financial inclusion are important drivers of growth in the region. Specifically, the results revealed that automated teller machine, mobile purchase, point of sale and mobile banking, as well as number of deposit accounts with commercial banks per 1,000 adults, number of registered mobile money accounts per 1,000 adults, number of active mobile money agent outlets, digital card ownership and financial literacy are vital predictors of growth. We also found evidence of bidirectional causality between the index of digital finance, financial inclusion and economic growth, suggesting that policy initiatives targeted at promoting digital finance and financial inclusion may boost growth. By controlling for institutional environment and macroeconomic volatility, we found that weak legal environment and macroeconomic volatility can deter growth. The study, therefore, concludes that COMESA region should encourage policies that will promote digital finance and financial inclusion.
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