The Impact of Financial Development, Financial Inclusion, Remittance Flows, and Exchange Rate on Economic Growth in Sub-Saharan African Countries: Evidence from RALS-EG Cointegration

Abstract

Financial inclusion (FININC) is increasingly becoming an important element of the policy debate in the region characterized by a shortage of FININC. This study analyzes the complicated interrelationship between gross domestic product (GDP), remittance (REMIT), financial development index (FDIX), FININC, and real exchange rates (EXR). Although energy access is identified as an important prerequisite for FININC in sub-Saharan Africa (SSA), the focus of this study lies in exploring the relationship between the above financial elements and GDP. Panel data ranging from 1990 to 2020 have been used to analyze the cointegration among the elements using the residual-augmented least squares Engle-Granger (RALS-EG) cointegration model. The study finds that there exists a long-run relationship between the mentioned elements. It is important to note that both the FDIX and EXR negatively affect economic growth in the long run. These results indicate that SSA economies remain vulnerable due to their dependence on fluctuating EXR that increase business risks. Alternatively, in the short term, the role of REMIT, FDIX, FININC, and EXR is positive toward GDP. Therefore, this research recommends that to improve FININC, certain policies must be implemented to reduce the cost of sending REMIT and ensure favorable conditions for FDIX.

Received: 12 December 2025 | Revised: 23 June 2026 | Accepted: 27 July 2026

Conflicts of Interest

The authors declare that they have no conflicts of interest to this work.

Data Availability Statement

The data that support the findings of this study are openly available at
https://databank.worldbank.org/source/world-development-indicators and https://data.imf.org/en/datasets/IMF.MCM:FDI.

Author Contribution Statement

Mehdi Seraj: Conceptualization, Methodology, Software, Formal analysis, Writing – review & editing, Visualization, Supervision. Chibuikem Dibor Alfred: Validation, Investigation, Data curation, Writing – original draft, Writing – review & editing.  Huseyin Ozdeser: Conceptualization, Writing – original draft.