INVESTIGATING FINANCIAL INCLUSION AND VENTURE CAPITAL FUNDING IN SELECTED SUB-SAHARAN AFRICAN CONTEXT

Abstract

The economies of Sub-Saharan Africa are still struggling to find steady growth trends, lower levels of poverty, including increasing venture capital activities. Hence, the fulcrum of this study in examining the synergy between financial inclusion and venture capital funding in selected Sub-Saharan African countries, with a focus on how various financial inclusion mechanisms such as account ownership, digital payments adoption and financial resilience affect venture capital funding. The study adopts a panel data technique covering 15 Sub-Saharan Africa countries from 2000 to 2024, the selected countries were based on data availability. Data and information that comprise secondary data in nature were obtained through World Bank Findex and IMF reports. The study employs the fixed and random effects regression models, complemented with Generalized Methods of Moments (GMM) methodology to account for endogeneity, to determine the important factors which influence venture capital financing, as well as examine the impact of different financial inclusion mechanisms. Empirical results reveal that account ownership- proxied by track ownership rates of accounts disaggregated by gender, income and region has a strong positive impact on venture capital funding. Further, digital payment adoption measured by tracks adoption rates across channels (in-store, online, digital wallets) exhibit a direct and significant impact on the venture capital funding. Conversely, empirical feedback of financial resilience- proxied by ACLI financial resilience index on venture capital funding reveals an indirect relationship.  These findings exemplify the importance of balanced and apt financial inclusion policies by regulatory bodies in order to ensure efficient venture capital financing in the SSA countries. The research has created academic knowledge, and the conclusions can be used by policymakers, investors, and entrepreneurs. The study has suggested that regulatory bodies in the Sub-Saharan African region must focus more on waging specific training to the entrepreneurs and owners of business-oriented towards the development of literacy in finance and entrepreneurial abilities which accentuate preparedness and involvement of the investors.