Tax Incentives and Financial Inclusion in Sub-Saharan Africa

By: Eric F. Nagbe Ph.D

Narrated by: Lorraine Crowston

In Sub-Saharan Africa, financial inclusion has rapidly increased recently. This is primarily due to the development of innovative business models like agent banking and digital financial services. However, around three-fourths of the adult Sub-Saharan African population does not have a bank account at a formal financial institution (World Bank, 2014). Only a little over 30 percent of adults were recorded to have a bank account in 2014, which went up by 6 percent from 2011 (IFC, 2020).

Low levels of financial inclusion in Sub-Saharan Africa have become a significant hurdle to the region’s economic growth. Research using household data shows that access to basic financial services like credit, payments, and savings can create a significant positive difference in the improvement of the poorer population’s lives (Dupas & Jonathan, 2013; Sarma & Pais, 2011).

An inclusive financial system will allow for broader access to financial services with non-price barriers. Without financial inclusion systems, the underprivileged population is reliant upon their minimal savings for investing in their education, starting an entrepreneurial business, and such. To a certain extent, financial exclusion contributes towards a persistent inequality in income (Ravallion, 2014). Financial inclusion has a multiplier effect on the overall economy, which is accomplished through higher savings pooled through the massive population segment at the lower end of the pyramid (Koku, 2015).

Enhanced engagement of this population with no proper bank accounts in the economy via the formal financial system can result in improved financial conditions and, subsequently, improved living standards. The focus of this audiobook is on the economic context of sub-Saharan Africa, particularly tax incentives.

©2021 Eric Filor Nagbe, Ph.D. (P)2021 Eric Filor Nagbe, Ph.D.