Measuring financial in African Countries

Abstract

International audienceThere is no consensus in the literature regarding the measure of financial inclusion. Previous studies mainly rely on supply-side information to measure the extent of financial inclusion. We contribute to this literature by using a newly created index of overall financial inclusion for 37 African countries for the periods 2011, 2014 and 2017. Our measure is determined by four dimensions: access, penetration, usage and barriers. Furthermore, we apply a two stage Principal Component Analysis (PCA) to assign weight to the dimensions. The proposed index is robust, comparable across countries. It is highly correlated with some macroeconomic variables such as GDP per capita, education, and institutional quality