Inclusive and Pro-poor Financial System in Africa: Does Islamic Finance Development Matter in Artificial Intelligence Era?

Why African financial system is less developed in general and how to improve his impact on real economy? Is Islamic finance development instrumental for inclusive and pro-poor financial system in Africa in artificial intelligence era? Does it matter in improvement of financial development impact on GDP per capita in particular? Are findings valid when we consider non-Muslim countries? This paper assesses the Ben Jedidia and Ben Ayed [1] conclusions in the African context. Thus, the intuition was to assess if Islamic finance can be instrumental in the way toward pro poor and inclusive financial system in Africa through improvement of financial development impact on GDP per capita. A TSLS-IV estimation technique is applied to undertake the analyses. In the analyses, while the Islamic finance dimensions have been approximated by the gap between M3 and Credit from banking and financial system, the financial development dimension was captured by an indicator constructed with Principal component analyses. The main finding is that Islamic finance is a powerful tool for pro poor and inclusive financial system in Africa regardless the fact that they are Muslim country or not. African countries regardless the fact that they are Muslim or not, should put emphasis on Islamic finance development for pro poor and inclusive financial system and thus pro poor economic growth. This paper has tested the Ben Jedidia and Ben Ayed [1] hypotheses in the continent where concerns of less develop financial system, poverty and low economic development are most acute.

Keywords:Financial deepening; Islamic finance; Economic growth; Risk, profits and Losses sharing; Participative Financial intermediation. Artificial intelligence era.

JEL Classification: G20, O11, Z12.