Financial Inclusion and Income Inequality: A Case Study of Selected Countries in Sub-Saharan Africa

Abstract

This paper looks at the impact of financial inclusion on income inequality in sub-Saharan Africa. Very few studies exist on this theme for African countries. The empirical testing is done using data for a select number of sub-Saharan African countries. Data on financial inclusion are disaggregated into formal and informal financial inclusion. The hypothesis is that in Africa, it is improvements in formal financial inclusion that are likely to have a wholesome impact on inequality reduction. The methodology used to test the hypothesis is the calculation of the Concentration Index using Convenient Covariance and Convenient Regression. This methodology which was originally developed in a World Bank study on health equity is being applied for the first time to analyse the relationship between financial inclusion and income inequality.