Author ORCID Identifier
Emmanuel Konadu-Yiadom: https://orcid.org/0000-0003-1011-5314
Abstract
Digital finance has become a key driver of the economy globally. Access to convenient and efficient financial services through digital platforms transforms how individuals and businesses manage their finances. Improved access to finance drives economic growth in an environment where the cost of borrowing is low. Available empirical evidence does not indicate if this argument assumes a certain threshold for the cost of borrowing. This study, therefore, explored the nexus between digital finance and economic growth across 44 African countries with emphasis on the moderating role of the cost of borrowing (proxied by the prevailing lending rate), spanning from 2004 to 2021. In addition, the study determined the lending rate threshold and its effect on the baseline relationship under investigation. Finally, the study carried out an income-based heterogeneity analysis to establish possible variation in the baseline relationship depending on income level. The dynamic system-Generalized Method of Moments (GMM) technique was employed in the study and revealed a positive association between digital finance and economic growth, albeit this relationship varies from low- to middle-income economies.Top of Form It was further established that there exists a lending rate threshold above which the digital finance-growth relationship becomes negative.
Recommended Citation
Konadu-Yiadom, E.,
Domeher, D.,
Opoku Appiah, K.,
&
Magnus Frimpong, J.
(In press).
Digital Finance, Lending Rate, and Economic Growth in Africa.
Information Technology for Development.
Available at:
https://aisel.aisnet.org/itd/vol32/iss3/13