The Effect of Financial Inclusion on Credit Risk in SADC Countries

Abstract

The objective of this study is to contribute to the knowledge about the relationship between financial inclusion and credit risk in the Southern African Development Community (SADC) countries, which remains relatively unexplored in the developing countries context. The result of panel vector autoregressive models (PVAR) estimation shows that there is no bidirectional causality between financial inclusion and credit risk, but there is unidirectional causality where financial inclusion improves credit risk. Furthermore, the feasible generalised (FGLS) estimation result confirms that financial inclusion reduces credit risk. Policymakers in SADC countries should implement measures that foster financial inclusion to achieve financial stability.