Relationship between financial inclusion and economic Growth of countries in the common markets for eastern and Southern Africa

Abstract

This study investigated the relationship between financial inclusion and economic growth within the Common Market for Eastern and Southern Africa (COMESA) region, with a particular focus on the roles of credit extension, mobile money, savings, insurance, and foreign direct investment. The primary objective was to examine how these financial inclusion indicators influence economic performance and to provide policy insights for enhancing inclusive growth. The research adopted a descriptive and explanatory design, utilizing panel data drawn from COMESA member states. Both primary and secondary data sources were employed, with financial and economic indicators spanning multiple years to capture regional trends. Econometric techniques, including regression and correlation analysis, were applied to establish the strength and significance of the relationships between financial inclusion variables and economic growth. Findings revealed that credit extension and mobile money services are the strongest predictors of growth, significantly enhancing entrepreneurship, investment, and access to financial services. Savings mobilization, deposit protection, and financial literacy were also found to contribute to financial stability, resource mobilization, and resilience. Insurance, though moderate in its effect, provided essential safeguards against risks and shocks, while foreign direct investment complemented domestic financial systems through capital inflows, technology transfer, and managerial expertise. Collectively, these factors reinforced the importance of inclusive financial systems in driving regional integration and sustainable development. The study concludes that financial inclusion plays a substantial role in fostering economic growth across COMESA countries. It emphasizes that countries investing in digital finance infrastructure, reducing structural barriers such as high collateral requirements, and harmonizing regional financial policies experienced stronger and more consistent growth outcomes. Recommendations include strengthening credit systems through improved credit information frameworks, expanding mobile money infrastructure and interoperability, intensifying financial literacy campaigns, promoting innovative insurance products, and diversifying foreign direct investment across sectors. The study also calls for greater policy harmonization within COMESA to deepen crossborder financial integration and enhance regional competitiveness.