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Inclusive Stability: Financial Inclusion and Stability

Küster, Hugo LU (2026) EKHS22 20251
Department of Economic History
Abstract
This paper examines the relationship between financial inclusion and financial stability using panel data analysis with fixed effects estimations alongside an instrumental variable approach to reveal causal links. The study focuses on 18 Sub-Saharan African countries whose financial inclusivity has in some form been affected and driven by mobile money technology, and is captured from the years 2004-2024. The study reveals mixed evidence, with correlation between the two variables being negative, but the causal model suggesting a strongly positive yet questionable effect. Through elaboration and inclusion of existing literature, it is shown that financial inclusion can pose threats of adverse risk selection, but also risk-diversification... (More)
This paper examines the relationship between financial inclusion and financial stability using panel data analysis with fixed effects estimations alongside an instrumental variable approach to reveal causal links. The study focuses on 18 Sub-Saharan African countries whose financial inclusivity has in some form been affected and driven by mobile money technology, and is captured from the years 2004-2024. The study reveals mixed evidence, with correlation between the two variables being negative, but the causal model suggesting a strongly positive yet questionable effect. Through elaboration and inclusion of existing literature, it is shown that financial inclusion can pose threats of adverse risk selection, but also risk-diversification for financial institutions. While financial inclusion remains important for economic development, the results highlight the need for balanced financial policies and effective oversight to reduce potential systemic risks. (Less)
Please use this url to cite or link to this publication:
author
Küster, Hugo LU
supervisor
organization
course
EKHS22 20251
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Financial inclusion, Financial Stability, Mobile Money, Sub-Saharan Africa
language
English
id
9244800
date added to LUP
2026-09-07 13:51:42
date last changed
2026-09-07 13:51:42
@misc{9244800,
  abstract     = {{This paper examines the relationship between financial inclusion and financial stability using panel data analysis with fixed effects estimations alongside an instrumental variable approach to reveal causal links. The study focuses on 18 Sub-Saharan African countries whose financial inclusivity has in some form been affected and driven by mobile money technology, and is captured from the years 2004-2024. The study reveals mixed evidence, with correlation between the two variables being negative, but the causal model suggesting a strongly positive yet questionable effect. Through elaboration and inclusion of existing literature, it is shown that financial inclusion can pose threats of adverse risk selection, but also risk-diversification for financial institutions. While financial inclusion remains important for economic development, the results highlight the need for balanced financial policies and effective oversight to reduce potential systemic risks.}},
  author       = {{Küster, Hugo}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Inclusive Stability: Financial Inclusion and Stability}},
  year         = {{2026}},
}