The push for financial inclusion in Africa: Should central banks be wary of political institutional quality and literacy rates?

Motivated by the literature on reform complementarities and their importance for the effectiveness of central bank independence (CBI) reforms—particularly for African countries—where CBI has empirically not been found to have a significant impact on financial development, we explore the extent to which differences in literacy levels and political institutions could determine the extent and impact of CBI on financial inclusion. Using panel data from 2004 to 2014, we find that, while CBI does not promote financial inclusion in Africa, financial literacy and political institutions do; even to the extent of enabling CBI's impact on financial inclusion. The results are robust to different measures of political institutions from Freedom House and Polity IV Database and present implications for the role governments could play in shepherding central banks in Africa in the midst of Africa's developmental challenges and the global crises. Related Articles Aideyan, Osaore. 2016. “Political and Institutional Prerequisites for Monetary Union: Assessing Progress in the Economic Community of West African States (ECOWAS).” Politics & Policy 44(6): 1192–212. https://doi.org/10.1111/polp.12183. Asongu, Simplice A., Joseph Nnanna, and Vanessa S. Tchamyou. 2021. “Finance, Institutions, and Private Investment in Africa.” Politics & Policy 49(2): 309–51. https://doi.org/10.1111/polp.12395. Scarlato, Margherita, and Giorgio d'Agostino. 2019. “The Political Dimension of Cash Transfers in Latin America and Sub‐Saharan Africa: A Comparative Perspective.” Politics & Policy 47(6): 1125–55. https://doi.org/10.1111/polp.12332. El impulso por la inclusión financiera en África: ¿deben los bancos centrales tener cuidado con la calidad institucional política y las tasas de alfabetización? Motivados por la literatura sobre las complementariedades de las reformas y su importancia para la efectividad de las reformas de independencia del banco central (CBI, por sus siglas en inglés), particularmente para los países africanos, donde empíricamente no se ha encontrado que la CBI tenga un impacto significativo en el desarrollo financiero, exploramos hasta qué punto las diferencias en alfabetización los niveles y las instituciones políticas podrían determinar el alcance y el impacto de la CBI en la inclusión financiera. Usando datos de panel de 2004 a 2014, encontramos que, mientras que CBI no promueve la inclusión financiera en África, la educación financiera y las instituciones políticas sí lo ha