Digital Financial Services And Sub-Saharan Africa Economic Development Panacea Or Placebo?

Abstract

This study investigated the effect of digital financial services on Sub-Saharan Africa (SSA) economic development. Economic development was proxied by human capital development index (HDI) while digital financial services was proxied by automated teller machine (ATM) volume transactions, point of sale (POS) volume of transactions, mobile banking service (MBS) volume of transactions, and number of ATMs available. Five SSA countries, namely, Nigeria, Ghana, Uganda, Cabo Verde and Kenya were chosen for the study. The data used for the study spanned from 2009 to 2020. The study was anchored on the Technology Acceptance Theory which is based on the belief that improvement in the economy is enhanced through using particular new technology and information system in business transactions. Panel unit root test carried out using different criteria showed that the data set were largely stationary at levels. Consequently, the fixed effects model was used for the analysis based on the outcome of the Hausman test. The results showed that the volume of ATM transactions and the number of ATMs had negative effect on HDI, implying that the higher the ATM usage and number of ATM available the lower economic development in SSA. The results also show that POS volume of transactions, and mobile banking volume of transactions had statistically significant effect on economic development in SSA. The study recommends that banks should ensure that ATMs provide convenience for customers by making them accessible and usable while also considering the rate charged for rendering such services.  Consequently, the study concluded that digital financial services is a long road which SSA needs to travel and make the economy significantly successful.