Financial Inclusion and Legal System Quality

Abstract

This paper reveals a positive association between financial inclusion and the quality of the legal system within a sample of 27 industrialized nations spanning the years 2004 to 2020. The research employs the metric of bank branches and ATMs per 100,000 individuals as indicators of financial inclusion, alongside many significant factors pertaining to the quality of the legal system. The results indicate that there is a positive correlation between an increase in one variable and an improvement in the other. There exists a positive correlation between the expansion of bank branches and the facilitation of procedures linked to construction permits and the enforcement of judgments. Conversely, there exists a positive correlation between the proliferation of automated teller machines (ATMs) and the facilitation of credit acquisition, contract enforcement, judgment enforcement, and insolvency resolution. The study asserts that there exists a mutually beneficial relationship between financial inclusion and the quality of the judicial system inside an economy.