Abstract
Since 2013–2015, financial inclusion has been considered a determinant of economic and social inclusion. Meanwhile, the impact of financial inclusion on economic development directly depends on financial stability. This paper focuses on the development peculiarities of financial inclusion in relation to ensuring financial stability and provides recommendations to Ukraine. The inclusive development theory and gap theory form the theoretical research base, while generalization, statistical methods, coefficient and graphical analysis, comparison and ranking represent its methodological basis. Financial institution development, financial literacy, income level, cashless economy, and public confidence have been justified as the content-forming factors and impact channels of financial inclusion on financial stability. The development peculiarities of financial inclusion are studied by cross-country analysis considering different financial system models and economic development levels. The weak points of financial inclusion in Ukraine are a sevenfold gap between the banks’ assets and non-bank financial institutions and 37% of the unbanked adult population. Moreover, there is a significant gap between the levels of human capital readiness and information security of banks’ digitalization compared to EU banks – by 2.5 and 1.3 times, respectively, and a critically high level of distrust in banks (70%) with a reasonably high share of payment applications users (58%).Further developing of financial inclusion and ensuring financial stability in Ukraine requires improving credit cooperation by transforming its structure from multi-institutional to mono-institutional and introducing the developed indicative tools for monitoring potential financial stability threats caused by technological innovations. AcknowledgmentThe study has been conducted within the framework of Applied Research “Ensuring financial stability of the financial sector of Ukraine’s economy on the basis of sustainable development and in the face of the latest epidemiological challenges” with the financial support of the Ministry of Education and Science of Ukraine (state registration number 0121U113271). The authors are also thankful to the editors and anonymous reviewers for their useful suggestions and comments to improve the quality of this paper.
Highlights
Over the last decade, the financial services market has undergone radical transformations
Financial literacy, income level, cashless economy, and public confidence have been justified as the content-forming factors and impact channels of financial inclusion on financial stability
The factors that have a direct impact on the development of financial inclusion in the country are: 1) the presence and sufficiency of financial institutions; 2) financial literacy of the population; 3) income level; 4) development of the cashless economy; 5) public confidence in the financial system
Summary
The financial services market has undergone radical transformations. The development of the financial services market is increasingly associated with financial inclusion, the relevance of which is emphasized by all financial regulators. The globalization of financial markets and the adverse effects of the Covid-19 have increased the importance of financial inclusion, viewing it as a driver of global and national economies and a prerequisite for ensuring financial stability. Ensuring financial inclusion for all financial market participants means creating conditions for their equal access to financial products and services. It can be ensured by introducing digital innovations in banking, improving the population’s financial literacy, creating digital banks and/or strengthening banks’ cooperation with FinTech companies.
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