The role of regulation in the relationship between financial development and inclusive finance in Sub-Saharan Africa

This study seeks to examine the role of regulation in the relationship between financial development and financial inclusion in Sub-Saharan Africa (SSA). Based on available data, the study used 30 SSA economies from 2008 to 2020, employing a generalized method of moments. The study found that as much as financial development enhances financial inclusion directly in SSA and regulation on its own brings more people into the financial system, increasing regulations that restrict financial sector activities in the region should not be above the level of 1.6047, or it would hinder financial development from improving financial inclusion. The study recommends that the financial sector introduce user-friendly products, including low-cost financial services. Second, the central banks of SSA economies can recognise or award financial firms that are the best contributors to financial inclusion. This will encourage other financial firms to do their best. Additionally, policymakers should consider the threshold when employing regulations to enhance financial sector-induced financial inclusion in SSA. Specifically, the study indicates that at least the mean of the current two years of regulations should be computed and compared to the threshold before deciding whether to be more restrictive or not.