Effects of Financial Inclusion of Small and medium Sized Enterprises on Financial Stability: Evidence from SSA countries

Damane, Moeti and Ho, Sin-Yu (2024): Effects of Financial Inclusion of Small and medium Sized Enterprises on Financial Stability: Evidence from SSA countries.

Abstract

We examine the impact of financial inclusion of Sub-Saharan Africa (SSA) small and medium-sized enterprises (SMEs) on financial stability. Results show that financial inclusion of SMEs negatively affects stability in SSA countries, and the negative link is even stronger as levels of financial stability increase across countries. Our findings are consistent with the theory of excessive credit expansion or extreme financial inclusion theory, suggesting that to safely promote SME financial inclusion and foster financial sector stability, efforts should be directed toward improving banking sector risk mitigation efforts, financial sector supervision and strengthening coordination among regional financial sector regulators.

• Item Type: MPRA Paper
• Language: English
• Keywords: Sub-Saharan Africa; Financial Inclusion; Financial Stability; Small and Medium sized Enterprises, Fixed Effect Model; Quantile Regression
• Subjects: G - Financial Economics > G0 - General > G00 - General; G - Financial Economics > G2 - Financial Institutions and Services; G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation

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