Digital Lending, Credit Risk, and Financial Inclusion in Emerging Economies

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Published May 30, 2026
https://doi.org/10.46362/chevra.v1i1.139
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Vol. 1 No. 1 (2026): CHEVRA: Indonesian Journal of Economic, Science, and Humanities

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Belau Kazeem Seun
Olabisi Onabanjo University, Ago-iwoye, Ogun State, Nigeria
https://orcid.org/0009-0009-0212-0528
Olumuyiwa Ganiyu Yinusa
Olabisi Onabanjo University, Ago-Iwoye, Nigeria
https://orcid.org/0000-0003-1005-2341
Kamildeen Tunde Arowona
Olabisi Onabanjo University, Ago-iwoye, Ogun State, Nigeria
https://orcid.org/0009-0000-0529-5248

Abstract

Background: While the rapid expansion of digital financial services has broadened financial access in emerging economies, it simultaneously introduces heightened credit risks that may impact overall financial stability and inclusion.


Purpose: This research examines the influence of digital lending and credit risk on financial inclusion across 44 African economies from 2005 to 2024.


Method: Using secondary panel data from the IMF and World Bank, the research employs a quantitative design with cross-sectional and longitudinal elements. Estimation is conducted using five complementary approaches—Fixed Effects with Driscoll-Kraay standard errors, Panel-Corrected Standard Errors (PCSE), PCSE with AR(1), Random Effects, and Dynamic Common Correlated Effects Mean Group (CCEMG)—to account for cross-sectional dependence, slope heterogeneity, and dynamic adjustments.


Result: Digital lending (proxied by mobile money transactions) significantly and positively affects account ownership across static estimators (β = 0.114 to 0.125, p < 0.05), confirming that electronic financial transactions expand access to formal financial services. However, this effect becomes statistically insignificant in the dynamic CCEMG model (β = 3.842, p = 0.785), suggesting cross-country heterogeneity moderates the impact. Credit risk (non-performing loans) consistently exhibits a negative and significant effect across all estimators (β = -0.731 to -1.210, p < 0.05), highlighting the constraining role of financial instability. Mobile communication infrastructure shows a positive effect that becomes significant only when cross-country dependence is considered (β = 0.121, p < 0.05). Macroeconomic variables (GDP growth and inflation) exhibit limited influence.


Contribution: The research provides robust empirical evidence that digital financial activity and financial sector stability are key drivers of financial inclusion, offering policymakers guidance to strengthen digital ecosystems, enhance technological infrastructure, and ensure prudent credit risk management. The findings also reveal important limitations—models explain only 3.7% to 14% of variation in account ownership—suggesting future research should incorporate additional determinants such as financial literacy, trust, and regulatory quality.

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Creative Commons License

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Author Biographies

Belau Kazeem Seun, Olabisi Onabanjo University, Ago-iwoye, Ogun State, Nigeria

Banking and Finance 

Olumuyiwa Ganiyu Yinusa, Olabisi Onabanjo University, Ago-Iwoye, Nigeria

Department of Banking and Finance, Associate Professor 

How to Cite
Belau, K., Yinusa, O. G., & Arowona, K. T. (2026). Digital Lending, Credit Risk, and Financial Inclusion in Emerging Economies. CHEVRA: Indonesian Journal of Economic, Science, and Humanities, 1(1), 47–77. https://doi.org/10.46362/chevra.v1i1.139

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