Financial Inclusion Initiatives Research Articles

Assessing incentives to increase digital payment acceptance and usage: A machine learning approach.

An important step to achieve greater financial inclusion is to increase the acceptance and usage of digital payments. Although consumer adoption of digital payments has improved dramatically globally, the acceptance and usage of digital payments for micro, small, and medium-sized retailers (MSMRs) remain challenging. Using random forest estimation, we identify 14 key predictors out of 190 variables with the largest predictive power for MSMR adoption and usage of digital payments. Using conditional inference trees, we study the importance of sequencing and interactions of various factors such as public policy initiatives, technological advancements, and private sector incentives. We find that in countries with low POS terminal adoption, killer applications such as mobile phone payment apps increase the likelihood of P2B digital transactions. We also find the likelihood of digital P2B payments at MSMRs increases when MSMRs pay their employees and suppliers digitally. The level of ownership of basic financial accounts by consumers and the size of the shadow economy are also important predictors of greater adoption and usage of digital payments. Using causal forest estimation, we find a positive and economically significant marginal effect for merchant and consumer fiscal incentives on POS terminal adoption on average. When countries implement financial inclusion initiatives, POS terminal adoption increases significantly and MSMRs' share of P2B digital payments also increases. Merchant and consumer fiscal incentives also increase MSMRs' share of P2B electronic payments.

Financial Inclusion and Bank Efficiency: Evidence from Data Envelopment Analysis

The issue of low financial inclusion in developing countries is an existing reality which needs to be improved. The present study focuses on evaluating the bank efficiency of India’s major drivers of financial inclusion, i.e., public and private sector banks, in fulfilling their task of financial inclusion. The time period considered is 2009/2010 to 2019/2020. A comparative evaluation of the role played by public and private sector banks in financial inclusion initiatives is measured on technical grounds using Data Envelopment Analysis. The Technical Efficiency scores conclude that the private banks are technically more efficient than the public sector in fulfilling this task. The public sector lags behind due to inefficient input utilization and they can improve their efficiency by switching to tech-based services like kiosk banking, and internet banking, and jointly promoting financial inclusion with private banks in order to improve their efficiency and save on their input resources.

Women’s Self-Employment as a Developmental Strategy: The Dual Constraints of Care Work and Aggregate Demand

The promotion of self-employment through financial inclusion initiatives has been adopted as a means of harnessing the entrepreneurial and productive capacities of women within the neoliberal developmental policy framework. This study presents a simple analytical model in the Post-Keynesian tradition to investigate the linkages between self-employment, aggregate demand, and unpaid care work by developing a two-sector model. It shows that a developmental strategy based on fostering women’s self-employment is constrained, on the one hand, by the macroeconomic conditions driving aggregate demand and, on the other, by the trade-off between the time allocation between unpaid care and paid work that the gendered division of care work responsibilities imposes on the self-employed woman worker. The promotion of self-employment cannot serve as a viable development strategy without policies that directly boost aggregate demand and at the same time relieve the burden of care responsibilities on women through public investment and social provision of care. HIGHLIGHTS Self-employment is too often uncritically prescribed as a vehicle for improving women’s livelihoods. Increased self-employment creates competing claims on women’s time between paid work and unpaid care. Women’s self-employment perpetuates gendered asymmetries of care responsibilities within the household. Macroeconomic demand conditions constrain the potential for women’s self-employment to increase livelihoods and support development. Financial inclusion policies alone have limited scope in sustaining women’s self-employment.

A study on Financial Inclusion for Rural Development in India with reference to Tourism Sectors

Financial inclusion has been recognized as being a critical means of poverty reduction amongst underprivileged persons living in rural India and a way of providing them with inexpensive and ready access to financial services as well. However, despite a plethora of financial inclusion schemes, the fact is that large numbers of people in rural areas are not benefited by them. The aim of this research was to examine the causes of the failure of financial inclusion schemes in India and to identify what needs to be done to give impetus to financial inclusion initiatives in the country. 100 rural folks were interviewed and the primary data was analysed. It was found that apathetic implementation of schemes, lack of awareness, disbursed funds being used for non – developmental / personal purposes and a lack of adequate distribution of banking facilities are the main reasons for limited success of financial inclusion schemes. The respondents indicated that there is an urgent need to diversify financial product offerings to beyond the current loan-based schemes. Similarly, the distribution networks and the modes of disbursement of financial inclusion schemes need to be urgently broadened. Technology plays a vital role in facilitating financial inclusion and the respondents have indicated several ways in which this may be done. Promoting financial literacy and ensuring safety and security of technology based financial instruments are other ways of facilitating financial inclusion. Perhaps the biggest stimulator of financial inclusion is the promotion of rural tourism as this provides the village people with a continuous and stable source of income in addition to agriculture. Finally, it may be noted that financial inclusion is not just providing village people with a wide range of financial services but providing them with the understanding of what these services are, how these products may be leveraged, with guidance and counselling on money management and awareness of the existence of these schemes and facilities as well.

A Qualitative Study on Financial Inclusion Initiatives in India

Bankers’ perception about various financial inclusion programs is a significant factor in successful implementation of financial inclusion initiatives. This study is aimed to investigate the experiences of bankers about various financial inclusion initiatives through qualitative research design. In-depth interviews of bank managers have been carried out in Ghaziabad district of India. The results indicate that shortage of staff in banks is a major challenge in Indian banking sector. Financial illiteracy and unawareness are the other challenges which are being addressed albeit through Financial Literacy initiatives of the Reserve Bank of India. Timely hiring of new staff in banks, their preparation and readiness for better decision making would certainly affect the situation of financial inclusion. The study is unique as it highlights the issues of financial inclusion through a qualitative research and provides bankers’ point of view on same.

The pillars determining financial inclusion among SMEs in Egypt: service awareness, access and usage metrics and macroeconomic policies

Over the past decade, financial inclusion has been a trending topic and key priority in developing countries seeking to build a resilient financial sector and pursuing economic growth. Most of the recently launched financial inclusion initiatives in Egypt, especially those aligned with the 2030 sustainability strategy, have targeted marginalized and excluded individuals. Only a few have addressed the financial inclusion of small- and medium-sized enterprises (SMEs). Accordingly, this paper aims to identify the main pillars of financial inclusion for SMEs. In keeping up with the mainstream literature, it introduces a number of financial inclusion determinants designed to attract SMEs. They include supply-side determinants such as access to financial services and marketing awareness campaigns, which act as tools to segment financial services and market their benefits to SMEs, and demand-side determinants, which involve the use of financial services. Finally, there is an assessment of the macroeconomic risks to investors and SMEs. The researchers’ methodology was based on first deriving a novel dataset from responses to a questionnaire addressing bankers who manage SME portfolios, second analyzing the dataset through descriptive and inferential statistics and third undertaking a twofold econometric estimation. The econometric estimations started with principal component analysis (PCA) and proceeded to a logistic regression to determine the significant variables pertinent to increasing the financial inclusion of SMEs. The PCA suggested three main pillars determining financial inclusion. They are integrated marketing tools, which increase SMEs’ awareness of and access to the most sophisticated banking services, usage of banking services, and assessment of the macroeconomic risks that would prevent SMEs from gaining access to financial services. As well, the interaction term between the variables derived from the three pillars accounts for a variability of 86.6% in the level of financial inclusion of Egypt’s SMEs.

Fintech-based Financial Inclusion and Risk-taking of Microfinance Institutions (MFIs): Evidence from Sub-Saharan Africa

Fintech innovations are rapidly transforming the global financial industry and easing the financial inclusion initiatives of microfinance institutions (MFIs). Such technological transformations are expected to promote stability in the financial system and in turn reduce the risk-taking behavior of its main actors. However, there is limited or no empirical evidence to confirm the impact of fintech-based financial inclusion (FinFI) on the risk-taking behavior of Sub-Saharan African MFIs. Thus, we have developed a new index to measure FinFI and empirically assess its role in reducing the risk-taking attitude of MFIs. The validity of our results was confirmed by using various robustness tests.

Poverty finance and the durable contradictions of colonial capitalism: Placing ‘financial inclusion’ in the long run in Ghana

This article situates contemporary debates about financial inclusion in the context of poverty finance interventions over the long term. Contemporary efforts to promote access to credit and other financial services for the poorest echo longstanding efforts, dating to the colonial period, to resolve recurrent development crises by expanding access to formal credit or creating alternative credit systems. The article argues that these efforts need to be understood as responses to deeply embedded social and ecological contradictions rooted in the political economy/ecology of colonialism. Theoretically, the article develops this argument by drawing together Marxian discussions of ‘secondary exploitation’ with discussions of the political ecology of indebtedness, showing how debts function both as important means of organizing labour and sites of contradiction. Empirically, the article maps out a series of conflicts in Ghana over the provision of credit to cocoa farmers, from roughly 1930–60, drawing on original archival research. These struggles are placed against the backdrop of longer-run social and ecological contradictions engendered by the early twentieth century cocoa boom. It concludes by showing how these contradictions are echoed in contemporary financial inclusion initiatives in general and responses to climate vulnerability in Ghana.

Sustainable economic development in India: The dynamics between financial inclusion, ICT development, and economic growth

The roles played by the financial sector and of information and communication technology (ICT) in economic growth are well established in the literature. With increasing development and the convergence between the financial and ICT platforms, digital financial systems emerged which have opened new opportunities to close the wealth gaps between the “haves” and “have-nots” in the developing world. In this paper, we examine the short-run and long-run dynamics between economic growth, financial inclusion initiatives, and ICT infrastructure development in 20 Indian states over the period from 1991 to 2018. Using the Granger-causality technique, we show evidence of strong temporal causality between these variables in the short and long term. Our empirical results demonstrate that careful co-curation of ICT infrastructure development, financial inclusion initiatives, and economic growth strategies is essential for these Indian states to achieve sustainable economic development.

THE CO-INTEGRATING RELATIONSHIP BETWEEN FINANCIAL INCLUSION AND ECONOMIC GROWTH IN THE SOUTHERN AFRICAN DEVELOPMENT COMMUNITY

This study examines the relationship between financial inclusion and economic growth in SADC. It uses panel data covering the period between 1995 to 2015 and employs the Autoregressive Distributed Lag (ARDL) Bounds and the Toda and Yamamoto and Dolado and Lutkepohl (TYDL) models to examine the co-integrating relationship and the direction of causality respectively. The impact of financial inclusion on economic growth, when measured by the mobile penetration rate and the number of bank branches, diminishes in the long run to an extent of having a negative relationship with economic growth. This implies possible thresholds beyond which a negative impact on economic growth is realized. The long-run influence of financial inclusion on economic growth is hinged on financial technologies, measured by fixed broadband internet services, which have great potential to foster unique financial inclusion and shift the economic paradigm, leading to a digitalized economy. Only financial inclusion initiatives that result in increased bank deposit accounts promote economic growth. SADC is encouraged to liberalize its information and communications technology sector in order to fully benefit from financial inclusion initiatives. In addition, SADC should consider embracing international financial monitoring standards so that it does not fall behind the inevitable integration of the financial sectors.

Community Lending in the US: A Comparative Analysis of Citibank and Wells Fargo Community Lending Practices

Credit banks in the United States provide specialized services to low-income communities through community lending projects. These projects provide financing for economic development projects for targeted beneficiaries, and, for... purchasing or funding small business loans, ... or community development loans,” including low-credit mortgages and low-interest term loans. Generally grouped as financial inclusion initiatives, these services represent a renewed endeavor amongst banks to strengthen Environmental, Social, and Governance (ESG) factors. This paper will examine the extent to which banks have been genuine community lenders, drawing on shareholder letters and annual reports from Citibank and Wells Fargo to qualitatively determine the institutions’ messages. From there, I will examine the balance sheets to account for the distribution of liabilities, particularly the extent to which ESG programs contribute to losses for banks. To further substantiate the extent of some of these practices, including fraudulent accounts and excessive overdraft fees from 2010-2018, the paper will draw on direct reports from the US Federal Government, including statements from the Department of Justice indicting Citibank & Wells Fargo for alleged illegal misreporting of profits and accounts. I will research data from academic papers published by the University of Michigan, the National Bureau of Economic Research, and the Annals of Regional Science. Ultimately, I will try to prove with these sources the extent of the risk community lending posed on corporate profits and whether the tradeoff can be ultimately profitable for the banks.

The Impact of Financial Inclusion Initiatives: A Meta-Analysis

The Impact of Financial Inclusion Initiatives: A Meta-Analysis

Assessment of micro, small and medium enterprises (MSME) financial inclusion initiatives by the commercial banks in Lesotho

This diagnostic study sets out to assess micro, small and medium enterprises’ (MSMEs’) financial inclusion initiatives undertaken by commercial banks in Lesotho. Data for this study was collected by administering a semi-structured questionnaire in four commercial banks operating in Lesotho. The feedback was analysed using descriptive statistics. This paper presents how study revealed that all the commercial banks have, to some extent, tailored their financial products/services and non-financial services to the needs of MSMEs. There are, however still gaps related to the scope and intensity of their actions on MSME financial inclusion. Almost all banks lack separate and comprehensive MSME financial inclusion policies. The implication is that the MSME financial inclusion aspects of the Financial Sector Development Strategy (FSDS) will not be implemented successfully in this context. There is a very limited adoption and adaptation of innovative loan products for MSMEs. On the basis of the findings and gaps, it is recommended that banks develop MSME financial inclusion policies. The policies should specify value propositions, organisational structures, products, processes and systems with which to respond to the MSME financial inclusion dimension of FSDS. Banks should adopt innovative MSME loan products such as financial leasing, factoring, commercial agriculture loan products that are particularly suited to the peculiar needs of crop, wool and mohair farmers and fruit growers, among others. The banks should adopt a common standard for defining MSME. The Government and the Central Bank of Lesotho should identify MSME financial inclusion indicators, develop a measurement framework thereof and institutionalise the periodic reporting of MSME financial inclusion information. This requires that banks upgrade their data management systems/management information systems to enable the capturing, storing, reproduction and sharing of accurate, timely and reliable MSME financial inclusion data.

Technology, small states and the legitimacy of digital development: combatting de-risking through blockchain-based re-risking?

An increasingly lamented consequence of re-regulatory efforts following the 2007/2008 global financial crisis has been ‘de-risking’—the growing disengagement by banks and other financial institutions with markets perceived as posing greater risks than justified by potential profits. As banks based in the Global North have moved to withdraw financial services from many emerging economies, de-risking has attracted attention for undermining financial inclusion and developmental efforts. Novel technologies are being harnessed to address this problem, including applications of blockchain, the digital ledgers of transactions originally underpinning cryptocurrencies. Contributing to IR theorising of legitimacy and re-risking, this article illustrates how technology-based de-risking efforts that seek to attend to the perceptions of foreign financiers can undermine the legitimacy of financial inclusion projects. Contrasting unfolding blockchain-based financial inclusion initiatives in two regions of small states in the Eastern Caribbean and Eastern Europe, our analysis stresses the need for greater local participation and clearer distribution of benefits from finance and technology (fintech) centred forms of digital development.

English

The use of formal financial services has been associated with increased financial wellbeing and overall economic growth. Efforts to increase financial inclusion have emphasized financial literacy provided through formal training and education without due recognition that people’s financial behaviors and practices may be motivated by social interactions. The current study examines the moderating effects of social learning on the relationship between financial literacy and formal financial services usage within a developing country context. Survey data collected from a sample of 351 adults in Kampala, Uganda, was analyzed using Pearson correlation coefficients, hierarchical regression, and ModGraph. Findings reveal significant positive relationships between financial literacy, social learning, and usage of formal financial services. Results indicate that social learning moderates the relationship between financial literacy and financial services usage among people in Kampala. The study finds peers and friends to be critical socializing agents with a significant influence on formal financial services usage. Beyond the promotion of financial literacy, financial inclusion initiatives should recognize the effects of social learning to increase the use of formal financial services in countries such as Uganda. The study integrates aspects of the social learning theory into the financial services domain hitherto dominated by finance and economic models. Key words: Financial literacy, financial inclusion, Uganda

News

Benevity partners with VolunteerMatchs. Kaiser Permanente launches new workforce training program for health care sectors. PayPal processed record amount of donations in 2019s. UPS Foundation awards $500,000 for disaster reliefs. JPMorgan commits $15 million for financial inclusion initiatives. Truist Foundation awards $1 million for online degree programs. Kohl's awards $2 million for healthy eating programs. Amgen Foundation commits $6.5 million to support online science education platform.

What explains low adoption of digital payment technologies? Evidence from small-scale merchants in Jaipur, India.

The availability of digital payment technologies (such as internet banking, mobile money, and credit/debit cards) has rapidly increased in the developing world, and is a cornerstone for financial inclusion initiatives in developing countries. Despite significant efforts to promote digital payments, rates of adoption remain modest in some low-income countries. In particular, the rate of adoption in India remains low despite significant efforts to promote adoption. In this paper, we consider possible reasons for the low rates of adoption among merchants in Jaipur, India with small fixed-location store enterprises. Using survey data for 1,003 merchants, we find little evidence that supply-side barriers to obtaining necessary infrastructure or meeting prerequisite requirements to adopt digital payments explain the low level of adoption. Merchants are able to obtain infrastructure to transact digitally (such as bank accounts and smart phones), fees on digital platforms are affordable, and merchants are sufficiently literate to be able to use digital payment systems. We conclude that adoption is both feasible and inexpensive. Therefore, low rates of adoption do not appear to be the result of supply-side barriers, but due rather to demand-side factors or taxes. We find direct evidence of such demand-side factors, such as a perceived lack of customers wanting to pay digitally, and concerns that records of mobile payments might increase tax liability. Our results thus suggest that simply lowering the costs associated with adopting these technologies is unlikely to be successful in increasing adoption of digital payments.

Blockchain, adoption, and financial inclusion in India: Research opportunities

The economic development of rural India requires connecting remote villages to local and global supply chains. Yet, high rates of financial exclusion inhibit rural Indians from participating in these supply networks. We review the literature on financial inclusion, adoption, and blockchain in India, and posit that to resolve financial exclusion, the four challenges of geographical access, high cost, inappropriate banking products, and financial illiteracy need to be overcome. Next, we argue that blockchain technologies hold the potential to overcome most of these challenges. However, for blockchain technologies to become the cornerstone of financial inclusion initiatives, an understanding of technology adoption in India is needed. To guide the development of such understanding, we develop a research agenda on the antecedents of adoption, adoption patterns, and outcomes of adoption. Answering these research questions will lead to a nuanced understanding of adoption of blockchain-based technologies in rural India. The practical contribution of this paper is the discussion of how blockchain can alleviate the issue of financial exclusion in rural India, thereby providing a basis for a solution that could connect rural Indians to global supply chain networks. The theoretical contribution lies in the identification of knowledge gaps that should be answered to achieve financial inclusion of rural Indians.

A systematic review of financial inclusion strategies and practices

Financial inclusion has been a key enabler in achieving sustainable development at a macro level. Inclusive financial system promotes policy objective of financial stability, economic growth and developmental goals of the nation. The micro and macro benefits of financial inclusion are immense. However, there coexist certain limitations. In India, barriers to financial inclusion can be categorized as income insecurity, socio economic condition, financial illiteracy and technological infrastructure. Financially excluded sections largely comprise of marginal farmers, urban slum dwellers, migrants, women, self-employed and senior citizens. One of the foremost challenges faced by banks is the inclusion of this financially excluded segment in the formal financial sector. Present study is carried out with following objectives. (1) To analyze the similarity and dissimilarity that exists in the financial inclusion initiatives across emerging nations. (2) To examine the interdependence of financial inclusion and financial stability of the economy. (3) To assess the payoffs of the financial inclusion interventions. For this paper, a systematic review of financial inclusion strategies and practices is made. It comprises of two sections: Section I summarizes on the pragmatic and institutional studies and the paybacks of financial inclusion at a macro level. Section II outlines the uneven distribution of the concerns underlying the financial inclusion initiatives. Barriers to financial inclusion can be categorized as income insecurity, socio economic condition, financial illiteracy and technological infrastructure. Section III gives the summary of the characteristics of Studies based on challenges of Financial Inclusion and the strategic payoffs. The next wave of inclusion should be to financially educate and prompt beneficiaries to use their access to financial services for improving their economic and social well-being.

Reconciling contradictory forces: financial inclusion of refugees and know-your-customer regulations

Providing access to financial services for asylum seekers and refugees is made difficult by know-your-customer financial regulations adopted as part of efforts to tackle money laundering and terrorist financing activities. Difficulties in identifying asylum seekers and refugees further complicate the urgent necessity of opening simple bank accounts, which is a crucial step towards integration. We review certain financial inclusion initiatives and assess European Union banking regulations from the perspective of offering financial services to asylum seekers and refugees. We conduct a novel survey of banks in the European Union to shed light on banks’ attitudes to the financial integration of refugees, their assessment of the relevant banking regulations and possible public–private partnerships to improve the financial integration process. We conclude that the solution to the financial inclusion problem is not to ease regulation, but to tailor it to the specific needs of refugees, while offering clear guidelines to banks and improving refugee identification. We make several recommendations, including the issuance of a European identification document to each refugee and the development of a pan-European registry of refugees.