Determining the role of digital technology, governance and institutions in advancing financial inclusion in BRICS nations using probit regression analysis

Abstract

In the era of the industrial revolution, the world has been witnessing a histrionic turnaround owing to the consolidation of several prevalent disruptive forces, especially in the domain of technology. The present study aims at unearthing the role of information and communication technologies, institutional environment and governance characteristics in advancing financial inclusion levels in BRICS nations by extensively using the World Bank's Global Findex Database 2017. For this purpose, the study utilizes data of individual characteristics of 10,627 adult individuals in these economies, country-specific factors such as GDP per capita growth rate, digital financial services (mobile cellular subscriptions and Internet penetration), institutional environment, and governance index. It employs probit regression to achieve the same objective. The findings suggest that Internet usage and mobile penetration rates have a positive association with financial inclusion indicators in BRICS economies. In addition to governance and institutional variables, the study further discovers that individual attributes and economic conditions such as income level, age, education level, gender, and government transfers too could influence financial inclusion indicators in these countries. Hence, it hints towards the need to strike a perfect match between embracing a pro-poor growth, an inclusive financial approach, a technologically developed infrastructure, efficient legal framework and proper administration. Finally, the study advocates that such moves are not an end in themselves rather a means to shoulder the responsibility of creating a new economic order in emerging economies via financial inclusion toolbox.