Institutional quality and digital financial Inclusion as complementary drivers of economic growth: A panel analysis of the SADC region
Collin Chikwira ORCID ↗
International Journal of Business Ecosystem & Strategy · 2026 · Vol. 8 / Issue 2 · 177-185
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Observed 21 Oct 2026, 00:14 UTC
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Abstract
The study examines how institutional quality and digital financial inclusion influence economic growth in SADC from 2000 to 2022, using panel data from the World Bank and IMF. It applies fixed- and random-effects models, selecting the appropriate model via the Hausman test, and uses Driscoll–Kraay standard errors to address heteroskedasticity, autocorrelation, and cross-sectional dependence. The empirical results suggest that institutional quality, proxied by legal rights, has a positive and statistically significant impact on economic growth at the 5% level (β = 0.000231, p = 0.0348). In comparison, financial inclusion is also positive and significant at the 1% level (β = 0.02345, p = 0.0010). Notably, the findings provide evidence of a synergistic relationship between institutional quality and financial inclusion, in which improvements in governance frameworks strengthen the growth-promoting effects of financial inclusion. The overall model is statistically significant (Prob > F = 0.0475) and accounts for roughly 40% of the variation in economic growth. These findings suggest that isolated policy interventions are inadequate; rather, a coordinated ecosystem of governance and financial systems is necessary. Enhancing legal and regulatory institutions improves the efficacy of digital financial systems, consequently optimising resource allocation and fostering inclusive growth. The study advances the existing literature by offering region-specific evidence on the synergistic interaction between institutional quality and financial inclusion within a developing-country context. From a policy perspective, the findings emphasise the need for integrated strategies that simultaneously promote institutional reforms (e.g., the rule of law and regulatory quality) and expand digital financial infrastructure. Such complementarities are crucial for boosting regional competitiveness, encouraging financial deepening, and fostering sustainable economic growth in the SADC region.
Keywords: {'name': 'institutiona quality, financial inclusion, weconomic growth'}
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Collin Chikwira
University of South Africa
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