How does banking concentration affect financial inclusion in the Southern African region?

Financial inclusion is an important enabler of economic development and aligns with several United Nations Sustainable Development Goals. In most sub-Saharan African countries, financial inclusion efforts take place in the presence of concentrated and bank-dominated systems. This study investigates the relationship between banking concentration and financial inclusion, focusing on account ownership, savings, and loans from 2010 to 2021. This paper employs dynamic panel threshold modelling to identify concentration thresholds that influence the direction of the relationship. A U-shaped relationship is identified, indicating relatively high levels of bank concentration that can benefit bank account ownership and loans. Thresholds for savings are relatively low. The effect of bank concentration on savings and loans is tempered by mobile phone penetration. Strong property rights and low levels of corruption also moderate this relationship, underscoring the importance of institutional frameworks in fostering trust and reducing informational asymmetries.