Digital Financial Services and the Growth of Manufacturing Sector in Selected Regions of Sub-Saharan Africa

This study examined the impact of digital financial services on the growth of the manufacturing sector in selected Sub-Saharan African countries, with the aim of addressing the problem of inconsistent manufacturing sector development in the region. The primary objective was to determine how Instant Pay Transactions, Internet Transactions, and Mobile Payment Transactions influence the manufacturing sector’s contribution to GDP from 2012Q1-2023Q4. The study utilized a Fully Modified Ordinary Least Squares (FMOLS) regression model, effectively deals with in dealing with potential endogeneity and serial correlation issues in panel data analysis. The findings revealed a dynamic relationship between digital financial services and manufacturing growth. Instant Pay Transactions were found to have a negative but statistically significant impact on the manufacturing sector, suggesting that while these transactions facilitate quick payments, they may introduce inefficiencies in production processes. Similarly, Internet Transactions had a negative and statistically significant effect, indicating that the shift toward digital platforms might divert resources away from traditional manufacturing investments. Conversely, Mobile Payment Transactions demonstrated a positive and statistically significant impact, highlighting their role in enhancing financial inclusion, reducing transaction costs, and supporting the growth of manufacturing firms. Based on these findings, the study recommended that central banks, such as the Central Bank of Nigeria (CBN) and the South African Reserve Bank (SARB), collaborate with commercial banks to tailor instant payment systems to the specific needs of manufacturers. Additionally, industry and trade ministries in Kenya and Ghana were advised to develop policies that integrate internet-based financial services with manufacturing investments. Finally, telecommunications regulators were urged to expand mobile network infrastructure and encourage the development of mobile-based financial products that support manufacturing growth. These targeted recommendations aim to optimize the benefits of digital financial services for the manufacturing sector, thereby fostering sustainable economic development in Sub-Saharan Africa.