Inclusive Financial Services Research Articles

Blockchain and decentralized finance (DEFI): Disrupting traditional banking and financial systems

Blockchain technology and Decentralized Finance (DeFi) are revolutionizing traditional banking and financial systems by eliminating the need for intermediaries, reducing transaction costs, and fostering more inclusive financial services. Unlike centralized systems that rely on trusted third parties such as banks and payment processors, DeFi operates on decentralized networks powered by blockchain technology. This innovation enables peer-to-peer financial transactions, smart contracts, and automated protocols, allowing for secure and transparent exchanges without the need for intermediaries. The disruption caused by DeFi challenges the conventional financial system by providing users with greater control over their assets and access to a broad range of financial services, including lending, borrowing, trading, and asset management. Through blockchain’s inherent features such as immutability, cryptographic security, and transparency, DeFi systems ensure trust less transactions, reducing the risk of fraud and errors while enhancing privacy. This paper explores the transformative potential of blockchain and DeFi in reshaping the financial landscape, addressing key benefits such as financial inclusion, the democratization of wealth, and more efficient global financial markets. However, the rise of DeFi also brings challenges such as regulatory uncertainty, technological risks, and the need for robust security measures to prevent fraud and ensure user protection. As DeFi continues to evolve, its impact on the future of finance is profound, offering both opportunities and risks that must be carefully navigated.

Ethical AI in Financial Inclusion: The Role of Algorithmic Fairness on User Satisfaction and Recommendation

This study investigates the impact of artificial intelligence (AI) on financial inclusion satisfaction and recommendation, with a focus on the ethical dimensions and perceived algorithmic fairness. Drawing upon organizational justice theory and the heuristic–systematic model, we examine how algorithm transparency, accountability, and legitimacy influence users’ perceptions of fairness and, subsequently, their satisfaction with and likelihood to recommend AI-driven financial inclusion services. Through a survey-based quantitative analysis of 675 users in China, our results reveal that perceived algorithmic fairness acts as a significant mediating factor between the ethical attributes of AI systems and the user responses. Specifically, higher levels of transparency, accountability, and legitimacy enhance users’ perceptions of fairness, which, in turn, significantly increases both their satisfaction with AI-facilitated financial inclusion services and their likelihood to recommend them. This research contributes to the literature on AI ethics by empirically demonstrating the critical role of transparent, accountable, and legitimate AI practices in fostering positive user outcomes. Moreover, it addresses a significant gap in the understanding of the ethical implications of AI in financial inclusion contexts, offering valuable insights for both researchers and practitioners in this rapidly evolving field.

The impact of digital financial inclusion on bank performance: An exploration of mechanisms of action and heterogeneity.

The use of digital technology by banks and other financial institutions to facilitate financial inclusion is referred to as digital financial inclusion. This fusion of digital finance and traditional banking methods has the potential to impact banks' operational effectiveness. This study uses the panel effects model to examine the link between digital financial inclusion and bank performance in 30 Chinese provinces from 2012 to 2021. This research uses kernel density estimation to examine the spatial-temporal growth patterns of both variables. The mediator variable in examining how digital financial inclusion affects bank performance is risk-taking. Finally, the paper analyses the regional heterogeneity of the impact. It presents the following conclusions: (1) In China, digital financial inclusion and bank performance have constantly increased, with noticeable regional variances in their development levels. This regional inequality has widened gradually since 2018, yet it has not resulted in polarization. (2) The significant positive correlation between digital inclusive finance and banking performance indicates that banking performance tends to increase with the enhancement of digital inclusive finance. (3) Digital financial inclusion impacts bank performance, with risk-taking as a moderator. The spread of digital financial inclusion services enhances banks' willingness to take risks, enhancing overall efficiency. (4) Digital financial inclusion boosts bank performance in the Northwest, South, North, and East regions while lightly inhibiting it in the Central region. Based on the findings, this study makes bank and government suggestions.

Responsible access to credit for sole-traders and micro-organizations under unstable market conditions with psychometrics

In a context of market volatility, the growing complexity of financial products, and a shift towards self-employment, there is an increasing demand for inclusive financial services for sole traders and micro-organizations. To address this need, we conducted a study using real-time data from a Fintech lender in the Czech Republic to assess the effectiveness of a new financial literacy based psychometric credit scoring model (PSM) in improving access to finance for micro, small and medium sized enterprises (MSME) sector, particularly sole traders, and micro-organizations, during volatile market conditions. This study affirms that PSMs play a significant role in responsibly including this underserved sector. Specifically, we observed a 30% higher approval rate and a 23% lower default rate when utilizing the PSM versus the traditional credit scoring model (TCSM). Moreover, during the period of substantial market volatility and instability, such as the state-of-emergency during the COVID-19 pandemic, the PSM exhibited a 13% higher approval rate at a 20% lower default rate than the TCSM. This evidence supports the proposition that PSMs offer a viable option for promoting financial inclusion and targeted financial education among MSMEs in the face of instable financial markets.

The Coordinated Development of Digital Inclusive Finance and the Real Economy

Through the use of modern information technology for digital inclusive financial services, its significance lies in promoting financial inclusiveness, lowering the threshold of financial services, promoting economic development, improving the efficiency of financial services, and supporting social equity and sustainable development. These effects make digital financial inclusiveness an important force driving social progress and economic development.

The role of big data in financial technology toward financial inclusion.

In the rapidly evolving landscape of financial technology (FinTech), big data stands as a cornerstone, driving significant transformations. This study delves into the pivotal role of big data in FinTech and its implications for financial inclusion. Employing a comprehensive literature review methodology, we analyze diverse sources including academic journals, industry reports, and online articles. Our findings illuminate how big data catalyzes the development of novel financial products and services, enhances risk management, and boosts operational efficiency, thereby fostering financial inclusion. Particularly, big data's capability to offer insightful customer behavior analytics is highlighted as a key driver for creating inclusive financial services. However, challenges such as data privacy and security, and the need for ethical algorithmic practices are also identified. This research contributes valuable insights for policymakers, regulators, and industry practitioners, suggesting a need for balanced regulatory frameworks to harness big data's potential ethically and responsibly. The outcomes of this study underscore the transformative power of big data in FinTech, indicating a pathway toward a more inclusive financial ecosystem.

Contibution of Sharia fintech to micro, small, and medium enterprises’ inclusivity in Kisaran City

IntroductionChallenges in access to inclusive financial services are still a major issue for many micro, small and medium enterprises in Indonesia, including in Kisaran City. However, research that specifically discusses this is still rarely carried out.ObjectivesThis research aims to analyze the role of sharia fintech in increasing the inclusiveness of micro, small and medium enterprises in Kisaran City.MethodThis research uses qualitative approach with primary data is obtained by interviewing three MSMEs owners using Sharia fintech. Secondary data is collected from books, the internet, academic journals, archives, and official records.ResultsThe results of this research show an increase in the use of Sharia Fintech by micro, small and medium enterprises in Kisaran City in 2020-2023. Apart from that, the use of Sharia fintech has a positive influence in increasing financial inclusiveness and encouraging the growth of micro, small and medium enterprises in Kisaran City..ImplicationsMicro, small and medium enterprises can use financial services from sharia fintech to increase access to funding and to expand customer payment models. Policy makers can continue to increase the role of sharia fintech for inclusiveness of micro, small and medium enterprises through more certain regulations and also increasing public education.Originality/NoveltyThis study contributes to enrich studies in the field of financial inclusion for micro, small, and medium enterprises with emphasize on the use of fintech.

Research on Credit Risk Management of Inclusive Finance in Bank A

MSMEs play an important role in China's economic system, and the Chinese government has been strongly emphasizing MSMEs' role of the massive wealth they create and the large number of jobs they provide. However, the difficulty of financing for MSMEs has always been a bottleneck restricting the development of MSMEs, for which the Chinese government has called on commercial banks to promote inclusive financial services for MSMEs. As MSMEs themselves have problems such as unstable operation, irregular corporate governance, and dependence on the personal credit of the controller, coupled with the severe macroeconomic situation in recent years, it makes the loan risk of MSMEs higher. Therefore, how to scientifically and effectively manage the risk of small and micro-enterprise loans has become the focus and difficulty of commercial banks' inclusive financial business.

Examining the Progression of Blockchain Technology and Its Implementation During Digital Economy

Blockchain technology is a peer-to-peer, distributed, and innovative database and disruptive information technology. It has features such as decentralized organization, tamper resistance, and anonymity. It has become the most critical element in developing a new generation of information infrastructure in China and a core component in driving the digital economy. Blockchain relies on the Internet ecosystem, providing not only the foundation for trusted protocols but also unlimited potential applications in inclusive financial services, digital assets, e-government, and other fields. It integrates the most advanced information technologies in modern society, making it of great significance in reshaping and developing the digital economy. This article explores the characteristics and development history of blockchain technology, as well as its current research status and potential theoretical value and practical significance when applied to digital economic scenarios. At the same time, it will discuss the current limitations of blockchain research, possible future directions, and development methods.

Financial inclusion and monetary policy effectiveness in a monetary union: Heterogenous panel approach

AbstractWe examine the nexus between financial inclusion and inflation targeting monetary policy effectiveness in West African Economic and Monetary Union countries by employing a heterogenous panel approach that enables us to delineate the responses to policy innovations related to idiosyncratic country‐specific shocks, common shocks, and composite shocks. We find that these shocks significantly affect inflation and financial inclusion but with varying magnitudes, signs, time of responses, and persistence. We further demonstrate that inflation targeting monetary policy is differently associated with the various dimensions and indicators of financial inclusion. Overall financial inclusion shocks temporarily increase inflation; deposit shocks reduce inflation; and credit shocks increase inflation. Central bank policy rate differently responds across time horizon to overall financial inclusion shocks; and it increases due to credit shocks highlighting that the monetary authority responds to credit shocks by implementing contractionary monetary policy. Our results highlight that monetary policy aimed at promoting inclusive financial services and responses of monetary policy to financial inclusion should be specific to the dimensions of financial inclusion.

Effect of Financial Inclusion on Agricultural Farm Performance in Rwanda: “ A case study of COMSS cooperative.”

Financial inclusion services are an important elements in agricultural farming operations. It makes it possible for producers to cover the cash requirements resulting from the agricultural industry’s unique production cycle, which typically occupies several months and generates very little cash income while necessitating spending money for materials, input purchases, and consumption. Access to financial services is one of several concerns that have an influence on smallholder farmers. Access to adequate, appropriate, and reasonably priced formal financial services for smallholder farmers, however, is a problem that frequently arises in Rwanda. Many rural residents continue to be practically cut off from the financial services required to maintain their survival and enhance agricultural farm performance . The general objective of the research was to find out how financial inclusion affected the performance of the agricultural farms in Muyumbu and Masaka sector . The study was additionally motivated by three specific objectives:to determine the effect of access of microcredit on the performance of the agricultural farm,to examine the effect of access of microsaving on the performance of the agricultural farm,to determine the effect of access of mobile money services on the performance agricultural farm . The target population was the smallholder rice farmers in Muyumbu and Masaka sector.To attain these objectives simple random sampling was employed .The information was given by 186 smallholder rice farmers in Muhazi and Masaka sector.A researcher employed quantitative method for data collection where structured questionnaires instrument was used, descriptive as well as correlative research design were used .Descriptive and inferencial statistics were applied for data analysis. Descriptive statistics employed were frequencies ,standard deviation, and mean. Correlation and multiple regression model were employed for inferencial statistics to show the link among variables ,and SPSS version 20 were also utilized for analysis of data.the findings were presented using tables. The results of this research demonstrated that there is a significant effect and positive contribution of access of microcredit ,microsaving and mobile money services on the performance of the agricultural farm in Rwanda as shown by the coefficient of.609*, which is regarded as a high and positive correlation according to the table’s Pearson correlation .The null hypotheses that financial inclusion has no significant effect on the agricultural farm performance was rejected. The study recommends that MFI should expand financial inclusion through access of microcredit, microsaving and mobile money services which significantly uplift agricultural farm performance. The researcher also suggests that different MFIs and government agencies should provide financial training as well as awareness programs for small-scale farmers on how to access microsavings, microcredit, and mobile money services, MFI should Explore the potential for linking microsavings programs with microcredit opportunities. This can create a holistic approach to financial inclusion, allowing farmers to not only save but also access credit when needed for investments in their agricultural activities.

Digital Financial Inclusion and Financial Vulnerability Analysis of the Household Economy - Empirical Evidence Based on CFPS

Abstract The global landscape of digital financial inclusion aims to extend broader, more accessible, and cost-efficient financial services via digital channels to those marginalized by conventional financial systems. Particularly in developing countries, household economic and financial fragility remains a pressing concern. Economic vulnerability denotes the incapacity of households to withstand unforeseen difficulties in the wake of economic downturns, precipitating a significant deterioration in living standards. This research investigates the role of digital financial inclusion in diminishing household economic vulnerability and enhancing the efficacy of financial services to address this challenge. Employing a fuzzy rough set algorithm to examine the China Family Panel Studies (CFPS) dataset, our analysis identifies critical factors of household economic vulnerability and their interaction with digital financial inclusion services. Findings demonstrate that digital financial services markedly reduce household economic vulnerability, evidenced by a 12% improvement in household solvency and a 20% uplift in financial resilience. Rural and lower-income families derive the most significant benefits from digital financial inclusion. Furthermore, the study underscores the importance of advancing financial literacy and refining financial product design as pivotal strategies in mitigating household economic vulnerability. This research offers valuable insights for policymakers and financial service providers on leveraging digital technology to bolster household economic stability.

The goal of financial inclusion in Zambia’s 8th national development plan

Zambia has not trailed behind other nations in promoting financial inclusion, one of its deliverables in its 2022-2026 Eighth National Development Plan. The analysis focused on the likelihood of reaching this goal and the implications for bank operating stability. A mixed research (quantitative and qualitative) approach was used and drew respondents from several remote areas in Zambia. A hypothesis test on the observed against the hypothesised mean (p-value = 1.93e-38 and <0.005) rejected the null to accept the alternative presupposition that banks have a relevant role in achieving financial inclusion, but they are not a necessary ingredient. The correlation test also aligned at both 95 and 99% confidence levels, that supported the null hypothesis to conclude that there is no correlation between the preferred channels of financial services and the adequacy of financial inclusion. Respondents felt that the financial inclusion services would still be offered at basic satisfactory levels regardless of the available form of financial service provider. The Kruskal-Wallis test supplemented the findings with p = 3.09667e-20(<0.05) that rejected null to conclude that any form of financial services is statistically significant in delivering basic financial inclusion in Zambia. The implications for banks are the risks for continuous survival because of the popular user-friendly alternative channels. It is recommended that the Bank of Zambia should sustain the relative relevance of formal banks by balancing their contributions with other innovative financial service channels. Banks should integrate with new market entrants, or the future will have a banking system without banks. Regulators must support banks’ survival traits such as the light set of criteria in their Know Your Customer (KYC) package.

Can Digitalization Foster Sustainable Financial Inclusion? Opportunities for Both Banks and Vulnerable Groups

Financial inclusion is a crucial link in achieving the Sustainable Development Goals (SDGs). Strengthening the capability of financial institutions to provide inclusive financial services can help to narrow the inequality gap and increase access to opportunities. Digitalization, with its competitive advantages and rapid growth, may be a powerful tool to foster financial inclusion and sustainable development. This paper examines the effects of bank digitalization on sustainable financial inclusion and explores two underlying incentive mechanisms in banks: profit driven and risk aversion. We construct a basic model and a mechanism model and exploit a nonlinear attempt, heterogeneous estimation as well as supplementary variable and instrument variable methods for a robustness test. The results of the basic model demonstrate that bank digitalization has significant positive effects on financial inclusion and the current financial inclusive effects are sustainable. The mechanism models designed as the mediation effect panel model suggest that digitalization enables banks to expand the business probability frontier of profit-driven behavior and pursuit of credit portfolio diversity in risk aversion behavior, thereby promoting sustainable financial inclusion. As a result of digitalization, vulnerable groups can benefit from sustainable financial inclusion, while financial inclusion feeds back into banks’ sustainable development. This paper conforms to the trend of the development of digitalization and provides theoretical and empirical support for banks to build digitalization and realize sustainable financial inclusion, which contributes to the “triple-win” financial ecology for improving banks’ performance, increasing the rights of vulnerable groups and promoting sustainable development throughout society.

The improvement of microfinance institution under inclusive finance: A case of Grameen Bank of China

In the rapid development of modern society, microfinance companies are an inevitable product of the economic market demand, and microfinance companies are bound by the relevant laws of China and enjoy the policy support of the state. As an effective supplement to traditional banking financial institutions, microfinance companies, with their flexible mechanisms and efficient services, are increasingly becoming an important force in achieving the goal of financial inclusion. However, due to the lack of supervision, shortage of capital, and excessive risks, microfinance companies have also been deviating from the original purpose of inclusive financial services, such as "non-farming" and "centralization" of loans. The emergence of the Grameen Bank in the 19th century - a "bank for the poor" - broke the original concept. It will be the case study for analysis in this paper. Using the case of Grameen Bank, this paper aims to explore the characteristics and advantages of small lending institutions, analyze whether they are replicable, sustainable and the social significance their existence brings, and make recommendations and prospects for promoting a greater role of microfinance companies in financial inclusion.

A Case Study on Status of Financial Inclusion of Women in Uttar Pradesh, India

India's rising economy has had significant development over the last ten years, including an annual GDP expansion of about 6%. Furthermore, the expansion has been exclusive and prejudiced toward women. Still, a sizeable percentage of the community, primarily women, lacks exposure to official economic facilities. Financial inclusion is viewed as a crucial measure for the growth and welfare of societies all over the world. In many nations, including India, offering inclusive financial services—that is, financial services that are reasonably priced for everyone—has emerged as a top goal.Female empowerment is a revolutionary strategy that aims to change social dynamics in advantage of the female population and is seen as being crucial to worldwide advancement. As a result, emerging countries are adopting an inclusive finance structure to accomplish vital to developmental goals. The current case study examines the social, political, and financial facets of women's empowerment. Additionally, it runs a test to evaluate if the proportions alter as an outcome of the financial inclusion. The author use research to create a systematic survey on women's financial inclusion and empowerment in Uttar Pradesh, India, using programmes like the PradhanMantri Jan DhanYojana (PMJDY), PradhanMantriJivanJyotiBimaYojana (PMJJBY), PradhanMantriSurakshaBimaYojana (PMSBY), and Atal Pension Yojana (APY). The outcome showed that the PMJDY scheme, particularly for women in Uttar Pradesh, seems to be quite productive and is having a favourable impact on social, political, and economic considerations of women's empowerment. The report advances the narrative on women in Uttar Pradesh and points out the critical necessity for the creation of a structured financial system in order to increase the extent of financial inclusion.

Digital inclusive financial services and rural income: Evidence from China's major grain-producing regions

We investigate the income effects of the digital inclusive finance on rural residents in the main grain-producing regions of China. By matching the DIF of Peking University with the CLDS household questionnaire data, the baseline results indicate that digital inclusive finance has a significant positive effect on the income of rural residents in the main grain-producing regions. Further, we examine the potential mechanism through which digital inclusive finance affects rural residents' income, and our empirical results show that digital inclusive finance can contribute to rural residents' income growth in terms of entrepreneurship, financial investment, non-agricultural employment and mechanized production.

Peran Literasi Keuangan, Perbedaan Gender dan Inklusi Keuangan terhadap Kapabilitas Pemasaran UMKM

MSMEs as an economic sector which very vulnerable to financial problems and are dominated by home industries that are attributable to gender stereotypes in their management. Consequently, the dynamics of its management become quite complex in enhancing their marketing capabilities. The purpose of this study to investigate the impact of financial literacy, gender differences, and financial inclusion on leveraging the marketing capabilities of MSMEs. Collecting data using a survey questionnaire on 168 MSMEs in Gorontalo City with a merge of accidental and snowball sampling techniques. Data analysis using binary logistic regression. The results reveal that the existence of financial knowledge has a significant impact on the creation of financial inclusion in micro, small and medium enterprises. Furthermore, there are different patterns for women and men in obtaining access to credit. The role of gender differences in men who are more likely to access inclusive financial services than women. On the other hand, the creation of financial inclusion further enhances the marketing capabilities of MSMEs.

North Macedonia on the Road toward Digitalization

ABSTRACT Technical advancements challenge traditional organizational structures, requiring more flexible, proactive, transparent, and inclusive financial services. The efforts to implement technological advancements in reducing the timeframe for executing financial services, but also maintaining safe and transparent financial services, require a high level of functional and technical knowledge. Using appropriate risk management and organizational knowledge flow for constant innovation optimizes the knowledge gaps and different knowledge levels.

Research on the Development Level and Differentiation of Rural Digital Inclusive Finance under the Background of Common Prosperity

Under the background of common prosperity, inclusive finance is facing new opportunities and challenges, and the active promotion of digital inclusive financial services in rural areas in China is of great significance for exploring the path of coordinated improvement of the development level of rural digital inclusive finance in various cities in Jiangxi Province, so as to comprehensively promote rural revitalization and solidly promote common prosperity. Based on the digital inclusive financial development data of 100 county-level districts in Jiangxi Province from 2014 to 2020, the results show that from 2014 to 2016, the overall development level of rural digital inclusive finance in various cities in Jiangxi Province has improved greatly. The development gap of rural digital inclusive finance in different cities has narrowed, but the development imbalance between regions is obvious. The increase in the depth of use is mainly limited by the dual dimensions of coverage breadth and digitalization. Based on the above conclusions, relevant policy suggestions are put forward from the aspect of development level, such as opening up sources and reducing expenditure, coordinating development to improve the radiation effect of developed regions, and capital market construction.