The determining factors of financial inclusion in Turkey

Abstract

Purpose- The purpose of this study is to investigate the impacts of GDP per capita, unemployment rate, cost of living index, gini coefficient, median age, urbanization rate, total length of railways and roads, number of road motor vehicles, number of mobile phone subscribers, number of broadband internet subscribers, literacy rate and mean years of schooling on financial inclusion in Turkey.. Methodology- The models were estimated using the Johansen Cointegration method, and the causality relationships between the variables were tested with the Granger and Toda-Yamamoto approaches. Findings- The Johansen approach findings reveal a significantly positive long–run co–movement between financial inclusion and GDP per capita, urbanization and a significantly negative long–run co–movement between unemployment, cost of living and financial inclusion. However, according to the results of the Granger method, there has been no causality relationship between the variables. The results of the Toda–Yamamoto causality test are consistent with the results of the Granger causality test, except fort the urbanization variable which has been found to have a short term casual effect on financial inclusion in the Toda–Yamamoto test. Conclusion- The significant relationship between the level of financial inclusion and the rate of urbanization in the short and long run reveals that the increase in the level of urbanization causes individuals to access financial institutions more easly and be able to use more financial products in Turkey.