article · Lafia Journal of Economics and Management Sciences
An analysis of 37 Sub-Saharan African countries between 2004 and 2022 evaluates how access to financial services affects debt sustainability. Focusing on measures such as automated teller machine penetration, bank branch availability, and domestic private credit, the investigation tracks their relationship with primary fiscal balance ratios and debt-to-gross domestic product metrics. The evidence shows that greater financial infrastructure, particularly physical bank branches and cash machines, significantly improves fiscal balances. Broadening access to finance for households and enterprises encourages growth-oriented economic activity, which ultimately boosts government tax revenues. Furthermore, higher financial inclusion lessens the restrictive impact that substantial public debt typically exerts on a government's fiscal space. Ensuring widespread availability of basic banking infrastructure and credit is therefore identified as an effective mechanism for strengthening public balance sheets and supporting fiscal stability across the region.
High sovereign debt restricts public investment and economic stability across many developing economies. Demonstrating that everyday banking access, through local branches and automated teller machines, directly aids national debt sustainability provides policymakers with practical non-fiscal tools. Expanding basic banking infrastructure can stimulate formal enterprise, increase public tax generation, and create greater fiscal resilience without relying exclusively on borrowing controls or budget austerity.
The findings offer early-stage empirical evidence relevant to public finance institutions, development finance bodies, and banking technology providers. While the abstract does not describe a commercial product or technical prototype, the evidence supports business cases for deploying financial infrastructure, such as cash machines and branch networks, in partnership with public sector initiatives seeking to expand local tax bases and broaden formal credit distribution.
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This study examines the impact of financial inclusion on debt sustainability in 37 Sub-Saharan African countries. Using panel data from 2004 to 2022, the study utilized the two-step system Generalized Method of Moments (GMM) estimator to explore how financial inclusion indicators - bank branch penetration, ATM penetration and domestic private credit - affect the primary balance ratio and its interplay with the Debt-to-GDP ratio. The findings from the study show that higher levels of ATM and bank branch penetration significantly enhance fiscal balances by promoting growth-enhancing activities that generate more tax to government. The findings generally reveal that financial inclusion has a significant positive impact on primary balance ratio, suggesting that access to financial services by households and firms promotes debt sustainability among SSA countries. Similarly, the interactive term for financial inclusion and debt sustainability included in the model indicates that financial inclusion reduces the consequential effect of high debt on fiscal space of SSA countries. This study finds that financial inclusion, facilitated by ATM penetration and bank branch availability, is critical for achieving debt sustainability in sub-Saharan Africa by stimulating economic growth and tax revenues. The authors recommend expanding financial infrastructure and credit access, while suggesting future research use more disaggregated data across all African countries.
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DOI: 10.70118/lajems-10-2-2025-01
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