Financial Outreach, Financial Innovation and Sustainable Development in Africa

AbstractThere has been a call on policy makers in the African continent to formulate and implement initiatives that help to realise some of the SDGs, due to the low performance of the continent in terms of meeting the targets of the SDGs. Because of this, the study sought to investigate how banks contribute to sustainable development in the continent. Information was collected on 34 African economies for a period of 11 years spanning from 2010 to 2020. The study employed the Two-step System Generalised Method of Moments technique to estimate the findings. It was discovered that financial outreach has a significant positive and negative relationship with sustainable development, depending on the indicator used to measure outreach. On various dimensions, financial outreach had a negative influence on carbon dioxide emissions, a positive impact on economic sustainability and an inverse relationship with social sustainability. It was also revealed that financial innovation has a significant negative link with sustainable development in Africa. Additionally, the findings revealed that both financial outreach and innovation serve as moderating variables in the finance/development nexus. The study recommends that governments and policy makers in various African countries work together with financial service providers to ensure fair, flexible, and alluring interest rates on loans to the underprivileged, disadvantaged ones in society, and vulnerable businesses to smooth their consumption and boost their businesses.