Financial Development and Tourism Performance in Sub-Saharan Africa: Evidence from a Multidimensional Finance Index

This study examines the effect of financial development on tourism performance in Sub-Saharan Africa (SSA), addressing the limited attention given to tourism as an outcome of financial sector development. Using panel data for 33 SSA countries from 2000-2021 and employing the System Generalised Method of Moments (System GMM), the study decomposes financial development into financial institutions and financial markets to examine their differential effects on international tourism receipts. The results show that overall financial development significantly enhances tourism performance, with financial institutions exerting a stronger influence than financial markets. Trade openness, institutional quality, digitalisation, and GDP per capita also positively influence tourism performance, while inflation exerts a negative effect. The findings highlight the importance of credit access, banking depth, financial inclusion, and macroeconomic stability in promoting tourism development in SSA. The study recommends strengthening financial institutions, expanding access to finance for small and medium tourism enterprises, and promoting digital and infrastructure financing to support sustainable tourism growth within the region.