Financial inclusion and economic growth: The role of governance in selected MENA countries

Noha Emara, Ayah El Said

Research output: Contribution to journalArticlepeer-review


Although the relationship between financial development and economic growth have been extensively studied, the literature that examines the role of financial inclusion, as a key factor of financial development, and the possible impact of governance quality on financial inclusion link to growth is not as vast. Promoting financial inclusion and developing good governance are main, but challenging priorities in the MENA region. The paper empirically investigates the relationship between financial inclusion, governance, and economic growth in the MENA region. A system General Method of Moments (GMM) dynamic panel model technique is employed on annual data for 44 emerging markets (EMs) and MENA over the period 1990–2018, using a number of measures of financial inclusion covering the households and the firms’ access to finance. Particularly, the study uses indicators such as the number of bank accounts (per 1000 adult population), bank accounts for corporates/enterprises, and the number of bank branches and ATMS (per 100,000 people), percentage of firms using banks to finance investments, and the percentage of firms using bank loans to finance working capital. The results of the study indicate that financial inclusion positively impacts GDP per capita growth in the selected countries. Financial inclusion measured by the households’ financial access index has a positive and statistically significant impact on economic growth in the MENA region, but requires supervisory and regulatory regimes with backing of the rule of law, judicial independence, contract enforcement, control of corruption, and political stability. The results also indicate that the effect firms’ access to finance is only statistically significant in the presence of strong institutions. Finally, our results imply that countries with relatively low levels of financial access services, such as the MENA region, would benefit the most from an improvement in governance. Hence, our policy implications are directed towards developing a national strategic plan aimed towards improving access to finance coupled with policies aimed at improving the level of governance in order to maximize the impact of financial access on economic growth.

Original languageEnglish (US)
Pages (from-to)34-54
Number of pages21
JournalInternational Review of Economics and Finance
StatePublished - Sep 2021
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


  • Economic growth
  • Financial development
  • Financial inclusion
  • Governance
  • MENA


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