Banking Sector Efficiency and Financial Inclusion in Africa: A Stochastic Frontier Panel Approach

Abstract

This study investigates the relationship between bank technical efficiency and financial inclusion across 30 African countries from 2010 to 2023, employing stochastic frontier analysis (SFA) combined with panel regression techniques. The analysis reveals that while improvements in bank efficiency are critical for operational optimisation, they do not automatically enhance financial inclusion. Instead, the interaction between efficiency and digital infrastructure is shown to be a significant driver of inclusion, highlighting the essential role of technology in bridging access gaps. Conversely, institutional quality exhibits a weaker moderating influence, suggesting that governance reforms have not kept pace with digital and financial sector innovations. The study provides policy-relevant insights, advocating for the integration of efficiency objectives with inclusive digital strategies and stronger institutional frameworks to achieve sustainable financial inclusion in Africa. These findings contribute to the growing literature on the interplay between bank performance, technology, and inclusive finance within emerging economies.