Savings, Not Foreign Cash, Lift Women’s Economic Prospects in Burkina Faso

In one of the most rigorous attempts yet to untangle how capital flows shape gender inequality in West Africa, economists Abdoul Rahmane Ouedraogo and Salmata S. Ouedraogo have found that the money a country saves at home may matter far more for women’s economic empowerment than the foreign investment it attracts. Their study, published in Discover Global Society, examines Burkina Faso across three and a half decades, from 1990 to 2024, and arrives at a conclusion that cuts against decades of development orthodoxy: domestic savings, not foreign direct investment, are the statistically reliable engine of women’s participation in the economy.

The timing could hardly be more consequential. Sub-Saharan Africa remains the world’s least gender-equal region, with an economic parity index estimated at just 68.5 percent and a gender inequality ratio exceeding 0.5. Burkina Faso sits squarely within this pattern. According to the World Economic Forum’s global gender gap data, the country achieves 90.3 percent parity in educational attainment and 97.8 percent in health and survival, but only 67.4 percent parity in participation in economic opportunities. The 2019 national census adds a sobering layer: the overall literacy rate stands at 31.9 percent, with men at 36 percent and women at just 27.9 percent, while women’s unemployment has averaged roughly 6 percent over the past five years according to World Bank figures.

To test whether the money flowing into and within the economy was changing this picture, the researchers assembled annual time-series data from the World Bank’s World Development Indicators and the International Country Risk Guide. They measured women’s economic participation through the ratio of female to male labor force participation, foreign direct investment as a share of GDP, and net national savings as an indicator of an economy’s self-financing capacity. Institutional quality was captured through a composite index built from six World Governance Indicators, spanning rule of law, voice and accountability, regulatory quality, political stability, control of corruption, and government effectiveness, with weights determined by principal component analysis to avoid the multicollinearity problems that plague these strongly correlated measures.

The econometric backbone of the study is an autoregressive distributed lag, or ARDL, model, a technique chosen for good reason. Unlike classical cointegration methods, ARDL can handle variables that are stationary at different orders of integration, a property confirmed here by Dickey-Fuller and Phillips-Perron unit root tests showing some series stationary in levels and others only in first differences. It also suits relatively small samples, and this one, spanning 35 annual observations, qualifies. The optimal lag structure, selected with the Akaike Information Criterion, produced a specification of ARDL(4, 3, 4, 2, 3), and the bounds test confirmed a long-run equilibrium relationship among the variables. The model fit was striking, with a coefficient of determination of 0.95, though the authors are careful to note the small sample when interpreting that figure.

The headline result is unambiguous. In the long run, foreign direct investment carries a positive coefficient of 0.482, but the effect on women’s economic participation is statistically insignificant. Net national savings, by contrast, delivers a coefficient of 2.716, positive and statistically significant, roughly five and a half times the size of the FDI effect. The explanation, the authors argue, lies in the structure of the Burkinabe economy. FDI flows have risen from less than 0.01 percent of GDP in the 1980s to a peak of 2.40 percent between 2011 and 2015 before easing to 1.32 percent, but they remain concentrated in the mining sector, an industry that is highly capital-intensive and generates few jobs for women. Weak linkages between foreign firms and the domestic productive base further dampen any spillover effects on female employment.

Domestic savings tell a different story precisely because of where they go. Women in Burkina Faso are overwhelmingly employed in agriculture and the informal sector, parts of the economy that attract little foreign capital but benefit directly from domestically financed development programs in education, vocational training, financial inclusion, women’s entrepreneurship, and small and medium-sized enterprises. Savings also represent a more stable and sovereign source of funding, insulating development finance from the volatility of global capital markets. The finding echoes earlier work by Bolarinwa and Obembe, who showed that domestic savings play a key role in financing productive investment across sub-Saharan Africa, and contrasts with Zandile and Phiri’s evidence of negligible direct FDI effects on growth in Burkina Faso.

The study’s most striking twist involves institutional quality, which the authors model not as a simple control but as a moderator interacting with both capital sources. Here the interactions between foreign direct investment and institutional quality, and between net national savings and institutional quality, are both positive and statistically significant in the long run. In plain terms, the same dollar of foreign investment or the same franc of domestic savings buys more economic opportunity for women when institutions are effective, transparent, and accountable. Graphical analyses of the interaction effects show the relationship clearly: at low institutional quality, additional FDI yields only modest gains, while at high institutional quality the positive correlation steepens dramatically. The pattern aligns with the institutional economics of North and of the 2024 Nobel laureates Acemoglu, Johnson, and Robinson, whose work argues that inclusive institutions determine whether resources are converted into broad-based prosperity.

The short-run dynamics add an important nuance. Net national savings and institutional quality show negative short-run effects but positive long-run ones, a divergence the researchers attribute to adjustment rather than contradiction. Higher savings temporarily reduce current consumption, and institutional reforms take time before their benefits materialize. Meanwhile, the negative and significant error correction term, estimated at roughly 0.503, indicates that about half of any short-run disequilibrium is corrected within a single period, implying a relatively rapid return to the long-run equilibrium path. Robustness checks using the fully modified ordinary least squares estimator and an alternative dependent variable, the index of women’s economic rights, broadly confirm the baseline conclusions.

The policy implications are concrete. The authors recommend directing foreign investment toward sectors with high potential for women’s employment, including agribusiness, agricultural value chains, local product processing, digital services, and light manufacturing. They call for domestic savings mobilization to be paired with expanded financial inclusion for women, through access to formal banking, affordable credit, digital financial services, and tailored savings products. Most fundamentally, they argue that institutional reform, from simplified administrative procedures to anti-corruption mechanisms and the digitization of public services, is the lever that amplifies everything else. In a country where government effectiveness has improved only marginally, from minus 0.85 to minus 0.83 on a scale running from minus 2.5 to plus 2.5, the message is that governance itself is a form of capital. The study does have limits, as its authors acknowledge: national aggregates mask regional and sectoral heterogeneity, and the analysis cannot capture structural breaks linked to Burkina Faso’s recent political upheavals. But its core finding stands as a challenge to both aid-dependent and investment-attraction strategies alike: empowering women financially may begin not with foreign money, but with what a nation manages to save, and with the institutions trusted to put those savings to work.

Subject of Research: The effects of foreign direct investment and net national savings on women's economic participation in Burkina Faso, moderated by institutional quality

Article Title: Do foreign direct investment and net national savings promote women’s access to economic opportunities in Burkina Faso? the moderating role of institutional quality

Article References: Ouedraogo, A. R., & Ouedraogo, S. S. (2026). Do foreign direct investment and net national savings promote women’s access to economic opportunities in Burkina Faso? the moderating role of institutional quality. Discover Global Society, 4(1), Article 257. https://doi.org/10.1007/s44282-026-00608-y

Image Credits: AI Generated

DOI: 10.1007/s44282-026-00608-y

Keywords: Burkina Faso, foreign direct investment, net national savings, institutional quality, gender economics, women's economic empowerment, ARDL model, governance indicators, development economics, sub-Saharan Africa, labor force participation, foreign