Financial Inclusion, Monetary Policy, Financial Sector Development And Financial Regulation In Sub-Saharan Africa

ABSTRACT This thesis is made up of three stand-alone empirical chapters that examine the relationship among financial inclusion, monetary policy, financial sector development and financial regulation in Sub-Saharan Africa. Chapter two presents an overview of financial inclusion, monetary policy, financial sector development and financial regulation in Sub-Sahara Africa. The overview show that Sub-Saharan Africa stock markets are comparatively young undercapitalized and they are not liquid. Nevertheless, in the last decade stock markets in Africa have performed well even after taking into consideration standard measures of risk and exchange rate effect adjustment. A lot of progress has been made across Sub-Saharan African countries to implement and strengthen structural reforms to enhance the process of financial intermediation. Over the years, credit provided by banks in Africa have been improving, though they are quite low relative to other emerging sub-regions. Chapter three is the first empirical chapter, which investigates the dynamic and bi-causal link between monetary policy and financial inclusion in sub-Saharan Africa using a panel VAR framework. The researcher obtained data from World Development Indicators (WDI) spanning from 1990 to 2014 for 48 sub-Saharan African economies. The findings suggest that a bi-causal relationship exists between monetary policy and financial inclusion. Specifically, it is evident that monetary policy affects financial inclusion, and financial inclusion is also influenced by monetary policy. The policy implication of this study is that the effectiveness of monetary policy depends on financial inclusion. Hence, the efforts of governments in sub-Saharan African countries should aim at policies that enhance financial inclusion for effective implementation of monetary policy. Also, promoting financial inclusion will require governments in sub-Saharan Africa to reduce their monetary policy rates.