Showing papers on "Financial inclusion published in 2017"
TL;DR: In this paper, the authors examine the growing importance of digital-based financial inclusion as a form of organizing development interventions through networks of state institutions, international development organisations, philanthropic investment and fintech companies.
Abstract: This paper examines the growing importance of digital-based financial inclusion as a form of organising development interventions through networks of state institutions, international development organisations, philanthropic investment and fintech companies. The fintech–philanthropy–development complex generates digital ecosystems that map, expand and monetise digital footprints. Its ‘know thy (irrational) customer’ vision combines behavioural economics with predictive algorithms to accelerate access to, and monitor engagement with, finance. The digital revolution adds new layers to the material cultures of financial(ised) inclusion, offering the state new ways of expanding the inclusion of the ‘legible’, and global finance new forms of ‘profiling’ poor households into generators of financial assets.
354 citations
TL;DR: The authors provides an overview of financial inclusion around the world and reviews the recent empirical evidence on how the use of financial products such as payments services, savings accounts, loans, and insurance can contribute to inclusive growth and economic development.
Abstract: There is growing evidence that appropriate financial services have substantial benefits for consumers, especially women and poor adults. This paper provides an overview of financial inclusion around the world and reviews the recent empirical evidence on how the use of financial products -- such as payments services, savings accounts, loans, and insurance -- can contribute to inclusive growth and economic development. This paper also discusses some of the challenges to achieving greater financial inclusion and directions for future research.
289 citations
TL;DR: In this paper, the impact of financial inclusion on income inequality, poverty, and financial stability in eight MENA countries over the period 2002-2015 is investigated. And the empirical evidence indicates that while financial integration is a contributing factor to financial instability in MENA, financial inclusion contributes positively to financial stability.
223 citations
TL;DR: In this article, the authors used an international sample of 2635 banks in 86 countries over the period 2004-12 to find that higher level of financial inclusion contributes to greater bank stability.
Abstract: Financial inclusion has become an important public policy priority following the recent global financial crisis. Yet, we know very little of how it impacts soundness of the providers of financial services. Using an international sample of 2635 banks in 86 countries over the period 2004–12, we find that higher level of financial inclusion contributes to greater bank stability. The positive association is particularly pronounced with those banks that have higher customer deposit funding share and lower marginal costs of providing banking services; and also with those that operate in countries with stronger institutional quality. The results are robust to instrumental variables analysis, controlling for bank fixed effects, alternative measures of financial inclusion, among several other robustness tests. Our results highlight that the importance of ensuring inclusive financial system is not only a development goal but also an issue that should be prioritised by banks, as such a policy drive is good for their stability.
222 citations
TL;DR: In this paper, the adoption of mobile telephony to provide financial services in sub Saharan Africa has become instrumental in integrating the hitherto unbanked segments of the population to the mainstream financial systems.
196 citations
TL;DR: This case study explores the development of a FinTech company in China that offers microloans to college students and sheds light on how digital technology offers the strategic capability for a firm to occupy a market niche in financial sector and enables the generation of alternative credit scores based on non-traditional data.
196 citations
TL;DR: In a meta-analysis of 126 impact evaluation studies, the authors found that financial education significantly impacts financial behavior and, to an even larger extent, financial literacy, but intervention impacts are highly heterogeneous: financial education is less effective for low-income clients as well as in low and lower-middle-income economies.
Abstract: In a meta-analysis of 126 impact evaluation studies, we find that financial education significantly impacts financial behavior and, to an even larger extent, financial literacy. These results also hold for the subsample of randomized experiments (RCTs). However, intervention impacts are highly heterogeneous: financial education is less effective for low-income clients as well as in low- and lower-middle–income economies. Specific behaviors, such as the handling of debt, are more difficult to influence and mandatory financial education tentatively appears to be less effective. Thus, intervention success depends crucially on increasing education intensity and offering financial education at a “teachable moment.”
193 citations
TL;DR: In this paper, the authors examined whether gender matters for financial inclusion and if so, what are the possible factors that influence this relationship and investigated the possible channels which impede financial inclusion for female-headed households.
158 citations
TL;DR: In this paper, the authors extend the existing literature on financial inclusion by analyzing the factors affecting financial inclusion and assessing the impact of financial inclusion on poverty and income inequality in the world and Asia.
Abstract: This paper extends the existing literature on financial inclusion by analyzing the factors affecting financial inclusion and assessing the impact of financial inclusion on poverty and income inequality in the world and Asia. We construct a new financial inclusion indicators to assess various macroeconomic and country-specific factors affecting the degree of financial inclusion for 176 economies, including 37 of which from developing Asia. We test the impact of financial inclusion, along with other control variables, on poverty and income inequality. We do so for full sample of countries and then for developing Asia sample to access which factors are relevant for full sample and for developing Asia specifically. The estimation results show that per capita income, rule of law, and demographic characteristics significantly affect financial inclusion for both world and Asia samples. However, primary education completion and literacy significantly increases financial inclusion only in the full sample, not for ...
157 citations
TL;DR: In this article, the authors apply fuzzy-set Qualitative Comparative Analysis (fsQCA) to determine the conditions related to financial practice and motivations that explain the absence of a formal bank account.
135 citations
TL;DR: In this article, the authors used the index of financial inclusion and the World Bank Global Findex database to identify those factors significantly associated with financial inclusion, and found that an individual's income, education, and use of communications equipment are important factors that explain the level of financial exclusion.
Abstract: Using the index of financial inclusion and the World Bank Global Findex database, this study measures the level of financial inclusion across countries. The results reveal a geographical spatial aggregation distribution in which developed European and North American countries enjoy higher levels of financial inclusion than the less developed countries of Africa and most of Asia. Accordingly, our spatial analysis proves our hypothesis and reveals dependence and aggregation effects among countries. Then, we employ spatial econometric research to identify those factors significantly associated with financial inclusion. The results show that an individual’s income, education and use of communications equipment are important factors that explain the level of financial inclusion, while financial depth and banking health status are the main determinants. Building an inclusive financial system is an important means for most countries to achieve the Millennium Development Goals.
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TL;DR: In this article, the authors show that financial literacy, representing the demand side of financial markets, also has a beneficial effect on financial inclusion and use of financial services, and the causal interpretation of these results is supported by IV-regression.
Abstract: While financial inclusion is typically addressed by improving the financial infrastructure we show that financial literacy, representing the demand-side of financial markets, also has a beneficial effect. We study this effect at the cross-country level, which allows to consider institutional variation. Regarding “access to finance”, financial infrastructure and financial literacy are mainly substitutes. However, regarding the “use of financial services”, the effect of higher financial literacy strengthens the effect of more financial depth. The causal interpretation of these results is supported by IV-regressions. Moreover, the positive impact of financial literacy holds across income levels and several subgroups within countries.
TL;DR: In this article, the impact of financial inclusion and bank concentration on the performance of firms in developing and emerging countries was studied using firm-level data for a sample of 55,596 firms in 79 countries.
TL;DR: In this article, the authors examined the impact of financial inclusion on growth of the economy over a period of seven years and found positive and significant impact of number of bank branch and Credit deposit ratio on GDP of the country, whereas an insignificant impact has been observed in case of ATMs growth on Indian GDP.
TL;DR: In this paper, the authors investigated the role of four critical resources (credit, electricity, contract enforcement and political governance) in explaining the quality of entrepreneurship and the depth of the supporting entrepreneurship ecosystem in Africa.
Abstract: Purpose
By drawing upon institutional theory, the purpose of this paper is to investigate the role of four critical resources (credit, electricity, contract enforcement and political governance) in explaining the quality of entrepreneurship and the depth of the supporting entrepreneurship ecosystem in Africa.
Design/methodology/approach
A quantitative approach based on ordinary least squares regression analysis was used. Three data sources were employed. First, the Global Entrepreneurship Index (GEI) of 35 African countries was used to measure the quality of entrepreneurship and the depth of the entrepreneurial ecosystem in Africa which represents the dependent variable. Second, the World Bank’s data on access to credit, electricity and contract enforcement in Africa were also employed as explanatory variables. Third, the Ibrahim Index of African Governance was used as an explanatory variable. Finally, country-specific data on four control variables (GDP, foreign direct investment, population and education) were gathered and analysed.
Findings
To support entrepreneurship development, Africa needs broad financial inclusion and state institutions that are more effective at enforcing contracts. Access to credit was non-significant and therefore did not contribute to the dependent variable (entrepreneurship quality and depth of entrepreneurial support in Africa). Access to electricity and political governance were statistically significant and correlated positively with the dependent variables. Finally, contract enforcement was partially significant and contributed to the dependent variable.
Research limitations/implications
A lack of GEI data for all 54 African countries limited this study to only 35 African countries: 31 in sub-Saharan Africa and 4 in North Africa. Therefore, the generalisability of this study’s findings to the whole of Africa might be limited. Second, this study depended on indexes for this study. Therefore, any inconsistencies in the index aggregation if any could not be authenticated. This study has practical implications for the development of entrepreneurship in Africa. Public and private institutions for credit delivery, contract enforcement and the provision of utility services such as electricity are crucial for entrepreneurship development.
Originality/value
The institutional void is a challenge for Africa. This study highlights the weak, corrupt nature of African institutions that supposedly support MSME growth. Effective entrepreneurship development in Africa depends on the presence of a supportive institutional infrastructure. This study engages institutional theory to explain the role of institutional factors such as state institutions, financial institutions, utility providers and markets in entrepreneurship development in Africa.
TL;DR: In this paper, the determinants of financial inclusion in Sub-Saharan Africa (SSA) were investigated using the World Bank country-level data from 20 SSA countries for the year 2014.
Abstract: Purpose
The purpose of this paper is to investigate the determinants of financial inclusion (FI) in Sub-Saharan Africa (SSA).
Design/methodology/approach
The paper uses the World Bank country-level data from 20 SSA countries for the year 2014.
Findings
The empirical findings in this study indicate that illiteracy is the major hindrance to FI in SSA. The findings provide useful information to government agencies and international development organisations. Also, the findings can help accelerate and strengthen FI strategies among SSA countries.
Research limitations/implications
Some countries were excluded from the final analysis due to lack of data.
Practical implications
In the last two decades, there has been renewed interest in fighting financial exclusion in Africa. Therefore, this study provide evidence which clearly shows that enhancing literacy levels in a country can immensely contribute towards building the financially inclusive societies in the SSA region.
Originality/value
To the best of the author’s knowledge, this is the first study to empirically test the determinants of FI in SSA using the World Bank FI data set. Furthermore, this is the first attempt to estimate the determinants of FI with a combined data of SSA countries.
11 Aug 2017
TL;DR: P pervasive vulnerabilities spanning botched certification validation, do-it-yourself cryptography, and other forms of information leakage that allow an attacker to impersonate legitimate users, modify transactions, and steal financial records are uncovered.
Abstract: Mobile money, also known as branchless banking, leverages ubiquitous cellular networks to bring much-needed financial services to the unbanked in the developing world. These services are often deployed as smartphone apps, and although marketed as secure, these applications are often not regulated as strictly as traditional banks, leaving doubt about the truth of such claims. In this article, we evaluate these claims and perform the first in-depth measurement analysis of branchless banking applications. We first perform an automated analysis of all 46 known Android mobile money apps across the 246 known mobile money providers from 2015. We then perform a comprehensive manual teardown of the registration, login, and transaction procedures of a diverse 15% of these apps. We uncover pervasive vulnerabilities spanning botched certification validation, do-it-yourself cryptography, and other forms of information leakage that allow an attacker to impersonate legitimate users, modify transactions, and steal financial records. These findings show that the majority of these apps fail to provide the protections needed by financial services. In an expanded re-evaluation one year later, we find that these systems have only marginally improved their security. Additionally, we document our experiences working in this sector for future researchers and provide recommendations to improve the security of this critical ecosystem. Finally, through inspection of providers’ terms of service, we also discover that liability for these problems unfairly rests on the shoulders of the customer, threatening to erode trust in branchless banking and hinder efforts for global financial inclusion.
TL;DR: In this paper, the authors explore the advantages and disadvantages of loans made by a large fintech lender and similar loans that were originated through traditional banking channels and find that LendingClub borrowers are, on average, more risky than traditional borrowers given the same FICO scores.
Abstract: Fintech has been playing an increasing role in shaping financial and banking landscapes. Banks have been concerned about the uneven playing field because fintech lenders are not subject to the same rigorous oversight. There have also been concerns about the use of alternative data sources by fintech lenders and the impact on financial inclusion. In this paper, we explore the advantages/disadvantages of loans made by a large fintech lender and similar loans that were originated through traditional banking channels. Specifically, we use account-level data from the LendingClub and Y-14M bank stress test data. We find that LendingClub’s consumer lending activities have penetrated areas that lose bank branches and in those in highly concentrated banking markets. LendingClub borrowers are, on average, more risky than traditional borrowers given the same FICO scores. We also find a high correlation between interest rate spreads, LendingClub rating grades, and loan performance. However, the correlations between the rating grades and FICO scores (at origination) have declined from about 80 percent (for loans that were originated in 2007) to only about 35 percent for recent vintages (originated in 2014-2015) -- indicating that alternative data has been increasingly used. The use of alternative information sources has allowed some borrowers who would be classified as subprime by traditional criteria to be slotted into “better” loan grades and therefore get lower priced credit. Also, for the same risk of default, consumers pay smaller spreads on loans from the LendingClub than from credit card borrowing.
TL;DR: The authors empirically examined the relationship between financial development and income inequality and found that financial development contributes to lower inequality up to a point, but as financial development proceeds further, it contributes to higher inequality.
Abstract: The central objective of our article is to empirically examine the relationship between financial development and income inequality. Theoretically, there are grounds for both a positive and negative relationship between the two variables. Our main finding is that financial development contributes to lower inequality up to a point, but as financial development proceeds further, it contributes to higher inequality. We also find that when the ratio of primary schooling to total schooling increases and law and order improves, financial development becomes more effective in reducing inequality. Finally, we find that financial inclusion is particularly effective in lowering income inequality.
TL;DR: In this article, the impact of financial development and financial inclusion on economic diversification in Nigeria has been investigated using the Fully Modified Least Squares (FMOLS) method, which is designed to provide optimal estimates of cointegrating regressions.
Abstract: The current oil-induced fiscal crisis in Nigeria has, once again, brought the country into the headlines as suffering great economic hardship. As a result, economic diversification is currently at the center of the debate on how Nigeria can improve its economic performance and achieve higher incomes. This discussion, however, has most of the times lacked an explanation of how financial development and financial inclusion can help to drive economic diversification in Nigeria. The literature is scanty in this regard. The objective of this study, therefore, is to contribute to this empirical evidence to the understanding of the impact of financial development and financial inclusion on economic diversification in Nigeria. The data for the study is from CBN Statistical Bulletin and World Development Indicators, for the period 1981 to 2014. It is well-known in the literature that employing the standard OLS techniques on non-stationary data may lead to spurious results. This study, therefore, uses the fully modified least square (FMOLS) which is designed to provide optimal estimates of cointegrating regressions. The results show that financial development has a positive effect on economic diversification, though the effect is not statistically significant. Additionally, financial inclusion, in terms of financial access and financial usage, has positive and significant effects on economic diversification. In other words, financial inclusion has contributed significantly to the diversification of the Nigerian economy. As well, GDP per capita, capital formation, and human capital development have positive and significant effects on economic diversification. FDI has positive effects on economic diversification, though the effects are not significant. On the contrary, exchange rate and trade openness have negative and significant effects on economic diversification. Financial inclusion can, therefore, be seen as a potent accelerator of economic diversification, and can help realize the national objectives of building shared prosperity and abolishing extreme poverty in Nigeria.
01 May 2017
TL;DR: In this paper, the authors proposed a framework to regulate the FinTech industry at the early stage, rather than rigorous rules traditionally placed on large financial institutions, to strike a balance between financial stability and access to financial services advanced by disruptive innovations.
Abstract: Online supply-chain financing has been a relatively novel funding channel for suppliers as small- and medium-sized enterprises (“SMEs”) to obtain loans in that the revolution of financial technology (“FinTech”) transforms traditional supply-chain financing, which used to be administered only by official banks, to an online model also used by electronic commerce platforms (“e-commerce platform”). Endeavours towards financial inclusion of the underserved SMEs could rationalize why we should allow for or encourage FinTech innovations exemplified by the online supply-chain financing mentioned above. What would be an adaptive regulatory regime for such innovative FinTech-enabled financial services as the online supply-chain financing? Within our conceptual framework to regulate the FinTech industry at the early stage, rather than rigorous rules traditionally placed on large financial institutions, a principles-based strategy should be adopted to strike a balance between financial stability and access to financial services advanced by disruptive innovations. As a necessary complement, regulatory sandboxes would be needed to spur a shift in institutional philosophy to a principles-based regulatory regime. In other words, the regulatory attitude of FinTech regulation should be humble and light-touch to promote innovation for improving digital financial inclusion, albeit on the premise of containing potential systemic risk and protecting consumer interest in the meantime.
TL;DR: The authors assess empirically whether financial inclusion contributes to reducing income inequality when controlling for other key factors, such as economic development and fiscal policy, and find that financial inclusion significantly reduces income inequality.
Abstract: In this paper, we assess empirically whether financial inclusion contributes to reducing income inequality when controlling for other key factors, such as economic development and fiscal policy. We...
TL;DR: In this paper, the authors investigate the impact of sukuk market development on economic growth using a sample comprising all the issuing countries spanning the period 1995 to 2015, and they conclude that the development of markets may have promoted financial inclusion by eliminating negative effects of religious self-exclusion, which stimulates investment and economic growth.
TL;DR: In this paper, the authors examined the effect of financial inclusion on economic growth in India over the 1980 to 2014 period and reported that financial liberalization policy has contributed to the economic growth.
Abstract: Financial inclusion is a multi-dimensional concept with heterogeneous views prevailing across the globe. The motto of financial inclusion is to provide affordable financial services to all sections of society to improve their standard of living. This is an integral part of economic growth as it not only assures financial sector development but also spreads affordable financial services for the betterment of each section of the society. Broadly, it is the process of allocation of the financial services to the weaker section of the society at an affordable cost. The motivation of this study is to examine the effect of financial inclusion on economic growth in India over the 1980 to 2014 period. The present study uses annual time series data on number of deposit and credit account from scheduled commercial banks in proportion to 1,000 adults, number of bank branches in proportion to 1,000 adults, and number of bank employees as the ratio of bank branches, amounts of deposits and credits as ratio of GDP collected from Basic Statistical Returns, RBI. Data for other macroeconomic controls like inflation, total trade, total secondary school enrollment (as a proxy for human capital) and government expenditure are collected from World development Indicators.The study employs Principal Component Analysis (PCA) to construct a financial inclusion index which measures the financial access in the Indian economy. Using the Autoregressive Distributed Lag (ARDL) and Error Correction Model (ECM), the study finds a positive impact of financial inclusion on economic growth both in the long run and short run. In addition, the empirical estimates posit a unidirectional relationship between financial inclusion and economic growth. Moreover, this study reports that financial liberalization policy has contributed to the economic growth in India. Our estimates suggest that the most important task for the government of India is to improve the efficiency of financial institutions, which will simultaneously stimulate financial inclusion as well as economic growth.
TL;DR: In this article, the authors examined the association between financial inclusion disclosure and firm performance in Bangladeshi banks from 2009 to 2014 in response to a regulatory directive on the engagement of banking firms in financial inclusion activities.
TL;DR: The authors identified the effect of local financial markets using Congressional legislation that led to unintended differences in financial market development across Native American reservations and found that individuals from financially underdeveloped reservations enter consumer credit markets later, and upon reaching adulthood, have ten point lower credit scores and four percentage point more delinquent accounts.
TL;DR: In this article, the authors identify the factors of mission drift in microfinance institutions, with special emphasis on the role of funding sources, and highlight the importance for policy to ensure that poor people have viable access to financial services from MFIs, toward promoting long-term sustainable development.
TL;DR: In this article, the authors explore the landscape of financial services in Africa through the prism of a selection of research papers and find that the landscape is as heterogeneous as the countries comprising the continent, common features include low levels of financial inclusion, low financial literacy, constrained access to credit, costly credit when available, gender discrimination in account ownership, and use and inefficient foreign exchange markets.
Abstract: Purpose
The purpose of this paper is to explore the landscape of financial services in Africa through the prism of a selection of research papers.
Design/methodology/approach
This is a review of literature that focusses on access to financial services (i.e. financial inclusion) and empirical findings from research papers in this issue of the journal.
Findings
The landscape of financial services in Africa is as heterogeneous as the countries comprising the continent. Common features include low levels of financial inclusion, low financial literacy, constrained access to credit, costly credit when available, gender discrimination in account ownership, and use and inefficient foreign exchange markets. Nevertheless, there are promising innovations, especially the mobile money innovation, which have the potential to foster more inclusive financial systems.
Originality/value
All the papers in this volume are based on original research shedding new insights on various aspects of financial services in Africa.
TL;DR: In this paper, a large sample of micro, small and medium enterprises (MSMEs) data in Zimbabwe was used to investigate gender gap prevalence in financial inclusion and assesses existence of gender heterogeneity in the returns to financial inclusion amongst MSMEs.
Abstract: Using a large sample of micro, small and medium enterprises (MSMEs) data in Zimbabwe, this paper investigates gender gap prevalence in financial inclusion. It further assesses existence of gender heterogeneity in the returns to financial inclusion amongst MSMEs. We construct composite indices that measure the entrepreneurs’ financial inclusion. Using Tobit and OLS regressions, we find statistically weak evidence of female financial exclusion in the formal financial sector after controlling for background characteristics and the industry of the entrepreneurs. On the other hand, female entrepreneurs are no less likely to be financially included in the informal financial markets than their male counterparts. Moreover, financial inclusion in informal financial markets by female entrepreneurs is associated with higher firm performance vis-a-vis their male counterparts.
TL;DR: Aadhi et al. as mentioned in this paper examined the promise of inclusive social protection central to India's Aadhaar scheme, a national initiative using biometric information to allocate unique identification numbers to Indian residents.
Abstract: This paper examines the promise of inclusive social protection central to India’s Aadhaar scheme, a national initiative using biometric information to allocate unique identification numbers to Indian residents. Aadhaar has reached over one billion people and promises to expand access to basic identification, improve enrolment in social protection and financial inclusion schemes, curb leakages, reduce corruption and address other gaps in India’s social protection architecture. However, the establishment of a national identification scheme does not of itself guarantee social protection. This paper assesses Aadhaar’s aims to achieve inclusive social protection through personal, civic, functional and entrepreneurial inclusion, and explores whether Aadhaar indeed fulfils these goals. Although it is too early conclusively to evaluate Aadhaar as a transformative contributor to social protection in India, there is much to be learned for transnational social protection from the scheme’s efforts to create a...