Heterogeneous effect of financial inclusion on vulnerable employment in Sub-Saharan Africa: the role of political stability

Abstract

Sub-Saharan Africa (SSA) stands as the epicenter of vulnerable employment. Among its key determinants, financial inclusion emerges as a critical yet underexplored factor. The region also exhibits comparatively low levels of financial inclusion. This paper investigates the heterogeneous effect of financial inclusion on vulnerable employment in SSA, with a particular focus on the moderating role of political stability. The empirical analysis relies on Quantile via Moments and Instrumental Variables Quantile Regression methods, using data from 25 countries over the period 2004–2019. The results show that financial inclusion significantly reduces vulnerable employment, with a stronger effect observed in countries where vulnerable employment is most prevalent. Moreover, political stability amplifies this narrowing effect. The findings also reveal that financial inclusion has a greater impact on reducing male vulnerable employment compared to female vulnerable employment. Additionally, all four dimensions of financial inclusion–usability, concentration, availability, and accessibility–contribute to lowering vulnerable employment. These results underscore the importance of policy reforms aimed at enhancing financial inclusion and strengthening political stability as essential levers for promoting access to quality jobs across the region.