The purpose of this paper is to identify factors relevant for financial inclusion (FI) and establish a model that shows how these factors lead to economic development (ED) through FI.,Primary data were collected through structured questionnaire. Out of 350, 311 respondents accurately filled the questionnaire. The data were collected from rural areas of Tamil Nadu. Exploratory factor analysis has been applied to evaluate drivers/factors relevant for FI. Confirmatory factor analysis has been applied to establish reliability and validity of the identified factors. A structural model has been proposed and empirically tested for ED through FI.,The main findings of the current paper are as follows: online banking (OB), understanding banking services (UBS) and financial literacy (FL) are the drivers of FI; FI can lead to ED, as the proposed model of ED, through FI, is supported in the paper (χ2/degree of freedom and CMIN/degree of freedom are less than 3; GFI and AGFI are more than 0.90 and 0.85, respectively). Behavior of the people, with respect to mode of financial transactions, has changed due to demonetization. (The χ2 test for mode of financial transaction is significant).,The geographical reach of the sample should cover the whole India. The sample should also have equal representation from rural and urban areas.,The identified factors for FI (OB, UBS and FL) should be more focused to bring about better results for FI in India. These factors can lead to a more effective execution of FI initiatives. In addition to this, policy makers can be confident of relying upon FI as a tool for ED.,The identified three drivers for FI have not been explored earlier. In addition to this, ED (through FI) in the form of structural model has also not been tested earlier. Government of India can realign their policies toward FI by using findings of this paper. In addition to increasing the access of formal financial system to masses, more thrust can be given to OB and FL for better results of FI in India.

Financial inclusion and socioeconomic development: gaps and solution

This study addresses the relation between financial inclusion and financial stability. In order to do so, we review studies on the diverse possible links between these two financial phenomena for developing countries. Although some results are still preliminary, from the reviewed studies we can draw some conclusions. First, risk may rise from rapid credit growth associated with new financial inclusion institutions and instruments, and from unregulated parts of the financial system. However, broader access to deposits that leads to a more diversified base of deposits, could improve significantly the resilience of the overall financial system and thus financial stability. A further conclusion is that it is important to specify what type of state intervention or regulation is necessary in the particular case of financial inclusion. The application of standards and other measures that guarantee financial stability might prove to be a setback to inclusion processes.

Can financial inclusion and financial stability go hand in hand

\n This paper reviews the literature on financial stability and financial inclusion—two broad objectives of financial policy that may be mutually dependent. The review suggests the possible co-dependence of stability and inclusion. We build on this theoretical motivation by exploring stylized facts (correlations) obtained from data sets that have been widely used in the literature on financial inclusion and stability. The empirical correlations suggest that, on average, financial inclusion and stability correlate negatively, but the correlations vary systematically across individuals, firms, and country contexts. Depending on the financial instrument and stability measure, positive correlations are also likely. These associations reflect some findings in the existing literature, but also point to knowledge gaps that can be addressed by future research.

Financial Inclusion and Stability: Review of Theoretical and Empirical Links

Financial Inclusion of The Small and Marginal Farmers by the Banking Sector in Kerala

Interest rate uncertainty adversely affects financial market performance and, eventually, economic growth. This study investigates the relationship between interest rate volatility and financial market inclusion for five selected emerging economies over the period 1980–2015. To do this, we assess the long-run and short-run relationship using Pesaran et al. (J Appl Econ 16:289–326, 2001) bounds testing approach to cointegration and error-correction modeling and Shin et al. (2014) nonlinear cointegration estimation method (NARDAL). The latter method incorporates nonlinearity into the model and enables us to check the asymmetric effects of interest rate variability on financial market inclusion. The findings of our linear models indicate that short-run symmetric effects lead to long-run symmetric effects in four countries (Turkey is the exception) and there is a long-run symmetric effect for the other four countries. On the other hand, estimation of nonlinear models shows the short-run existence of asymmetric effects for all five emerging economies. We found that the long-run effect of interest rate volatility is asymmetric in all countries except for Mexico. We suggest that this group of countries should cautiously pay attention to laws and regulations related to their financial market and interest rate policies. Our estimation results show that interest rate uncertainty significantly affects financial market inclusion and has an important role in financial market development and eventually achieving higher economic growth.

The impact of interest rate volatility on financial market inclusion: evidence from emerging markets

Financial inclusion strategies can be defined as road maps of actions, agreed and defined at the national or subnational level,that stakeholders follow to achieve financial inclusion objectives. Successful strategies coordinate efforts with the main stakeholders, define responsibilities among them, and state a clear planning of resources by, for example, prioritizing targets. A strategy can promote a more effective and efficient process to achieve significant improvements in financial inclusion, and is ideally prepared with the private sector in order to establish and achieve shared, achievable goals for financial inclusion. A comprehensive approach to financial inclusion addresses at least three aspects: access to financial services and products; usage of financial services and products; and quality of financial services and products, defined by consumer ability to benefit from new financial services and products.

Claudia Ruiz Ortega

Papers

Financial inclusion strategies : reference framework