THE INFLUENCE OF RELIGION AND SOCIAL INEQUALITY ON FINANCIAL INCLUSION

Abstract

We examined the influence of religious and social inequality factors on financial inclusion based on the fact that Muslim countries mostly have the lower level of financial inclusion around the globe. To do that, first, we calculated the financial inclusion indices (FIIs) of 152 countries including 48 OIC countries. Then, we examined the effect of religious and social inequality factors on financial inclusion using ordinary least square (OLS). Subsequently, we examined the Moran’s-I test in the OLS models and estimated spatial autocorrelation (SAR) models and spatial error model (SEM) in order to include the spatial correlation effect on the estimate models. Through these estimations, we found that the religious factors, such as whether OIC or non-OIC, religious diversity and Muslim population, have obvious effects on determination of financial inclusion. In addition, we also verified social inequality factors, such as gender inequality, education level and social opportunity level, work as determinants of financial inclusion. Moreover, we found the evidence that financial inclusion itself and unknown factors of neighbor countries have effects on financial inclusion by identifying the spatial effects of analysis models.