Institutional determinants of financial inclusion: evidence from world economies

Abstract

PurposeFinancial inclusion is an approach for mobilizing saving and facilitating investments that help promote economic development and pave the way for sustainable development. This paper aims to examine the impact of world governance indicators (WGIs) on the improvement of financial inclusion across world economies.Design/methodology/approachThis paper uses the global database of financial inclusion indicators (global findex) for the years 2011, 2014 and 2017. The WGIs are used as proxies for the effects of governmental institutional arrangements. Using panel data analysis, a fixed generalized linear model is estimated for four common financial indicators; namely, borrowed from a financial institution, saved at a financial institution, credit card and debit card ownership.FindingsThe empirical results reveal that control of corruption, government effectiveness, political stability and voice and accountability are the significant WGIs that influence financial inclusion significantly.Originality/valueThis paper contributes to the literature in two ways. First, this paper offers validating the results previously reported in related studies. Second, this paper offers robust estimates of the effects of the institutional WGIs on the promotion of financial inclusion.