Financial Inclusion and Entrepreneurship in Six Sub Saharan African Countries: Evidence from FinAccess and FinScope Survey Data

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GAKPA, Lewis-Landry
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African Economic Research Consortium
This paper investigates how financial inclusion affects individuals’ decisions to start businesses in the context of six Sub-Saharan African countries, using micro-data from the FinScope and FinAccess surveys. To do so, we use an instrumental variable (IV) technique to assess the empirical relationships. Overall, the results reveal that access to banking services, formal non-banking services, informal financial services and mobile money services positively and significantly influence the decision to start businesses in the six countries, namely Kenya, Rwanda, Tanzania, Uganda, Namibia and Zambia. Furthermore, although the results show that a range of both demand and supply-side barriers prevent individuals from accessing banking services for entrepreneurial purposes, supply-side constraints are the most common barriers to individuals starting a business. In view of the above, policy interventions should first aim at creating an enabling environment to increase people’s access to all types of financial services and, secondly, address both supply- and demand-side constraints to promote entrepreneurship and economic growth. These measures should be aimed at increasing the level of financial inclusion with a view to stimulating entrepreneurial activities, which are the real pillars in development and poverty reduction process in Sub-Saharan African countries.