CONFLICT, INSTITUTIONAL FRAGILITY AND ENTREPRENEURIAL RESILIENCE IN AFRICA: CAN FINANCIAL INCLUSION CUSHION BUSINESS-CREATION SHOCKS?

Abstract

This study investigates how armed conflict and institutional-security fragility relate to formal business creation in Africa and whether financial inclusion cushions conflict-related shocks. The empirical evidence comes from a country-year panel assembled from the World Bank Entrepreneurship Database, the Uppsala Conflict Data Program Georeferenced Event Dataset, the Worldwide Governance Indicators, the World Development Indicators and Global Findex. The estimating sample contains 371 observations covering 45 African economies between 2015 and 2024. Formal entry is captured by the density of newly registered limited-liability companies, while conflict exposure is expressed as fatalities per 100,000 people. Institutional-security fragility combines political stability with government effectiveness, and the financial-access indicator is constructed from ATM and commercial-bank branch density. Two-way fixed effects form the main specification. The analysis is then repeated under different timing and modelling choices, including distributed lags, country-specific trends, first differences, predetermined finance, alternative conflict measures, Poisson estimation, Findex validation and leave-one-country-out exercises. One finding is notably persistent across these tests: greater institutional-security fragility is associated with weaker formal business creation. The coefficient on annual conflict intensity is far less stable after country effects, year effects and macroeconomic conditions are taken into account. The proposed buffering role of finance is equally uncertain. Although one dynamic specification produces a favourable interaction, that result disappears in the more demanding checks. For the economies and years observed here, formal entrepreneurial resilience is thus more consistently related to the institutional-security environment than to a wider conventional financial-access network.