Purpose Africa remains one of the regions with the lowest financial inclusion (FI), and the continent is witnessing rising insecurity (INSEC). This study explores INSEC's impact on FI in 39 African nations (further grouped into middle-income and lower-income countries, as well as low-insecure and high-insecure nations) from 2004 to 2023. Design/methodology/approach This research adopts the system-GMM to evaluate the effect of INSEC (captured by military expenditure) on FI (proxied by a composite FI index, developed using the Principal Component Analaysis or PCA method). Findings The findings portray a dampening effect of INSEC on FI in the whole sample and sub-groups (i.e. middle-income and lower-income nations). Additionally, INSEC constitutes a major barrier to FI in high-insecure economies, but not in less-insecure countries. Moreover, GDP growth and political stability promote FI, while agricultural output, inflation, money supply and poverty constrain FI. Practical implications The study reveals that improving security is essential for enhancing FI across Africa. This has direct implications for achieving the SDGs, particularly Goals 1, 8 and 16. Originality/value This study empirically examines the underexplored nexus between INSEC and FI in a panel of 39 African countries (consisting of low-insecure and high-insecure economies). Also, it constructs a composite FI index and proxies INSEC by military expenditure, thus, providing a broader economic perspective.
Abu et al. (Tue,) studied this question.