10th U6+ Consortium of African Universities International Conference

Digital transformation and financial technology (FinTech) are increasingly being considered as key to inclusive and sustainable development, especially in the emerging economies where access to the traditional financial systems has been low. Although there is an increasing interest in digital finance, there is scanty empirical data on the interaction between digital transformation and FinTech and their impact on inclusive development in African economies. This paper thus examines how digital transformation and FinTech can be used together to facilitate inclusive development in five strategically chosen African economies. The study uses a panel Autoregressive Distributed Lag (ARDL) model to analyse both the long-run and short-run relationships between the variables. The findings prove the existence of the long-run equilibrium relationship between digital transformation, FinTech, and inclusive development. FinTech becomes the most significant factor of inclusive development, which means that digital financial innovations are important in increasing financial access and economic inclusion. Digital transformation is also beneficial to inclusive development, but its impact is less significant than that of FinTech. Digital transformation and FinTech have a positive relationship, which implies that digital infrastructure creates greater development advantages when paired with financial innovation. Although of importance, institutional quality does not have a strong direct impact but seems to act as an enabling framework of digital and financial innovation. The results are stable as evidenced by robustness checks based on mean-group FMOLS and DOLS estimations. The results emphasize the need to enhance the digital financial ecosystem in order to attain inclusive and sustainable development in Africa. The research is relevant to the literature in that it presents new empirical data on the interactive nature of digital transformation and FinTech in determining inclusive development outcomes in various African economies.