Low Level Of Financial Inclusion Research Articles

Financial Inclusion and Human Development: Evidence from African Countries

Africa is a continent that has experienced significant economic and developmental challenges, including high levels of poverty, income inequality, and limited access to financial services. According to a report by the World Bank in 2020, Africa has the lowest rate of financial inclusion in the world. Financial inclusion is important in that it contributes to the achievement of 7 out of 17 sustainable development goals provided by the United Nations. Apart from having low levels of financial inclusion, African countries are also ranked lowest in terms of human development. There is a growing consensus that financial inclusion is essential for economic growth and human development. This study examined the effect of financial inclusion on human development in African countries. To achieve the research objective, the study employed a panel longitudinal research design that involved collecting secondary data for the period between 2011 and 2020 on an annual basis for each of the 54 African countries. Findings indicate that financial inclusion, measured by bank branches, ATMs, deposit accounts, and loan accounts, has a positive and significant effect on human development in African countries. The study concludes that fostering financial inclusion is crucial for promoting human development in African countries. Policy implications include the need to enhance access to banking services, along with developing supportive regulatory frameworks. The study also emphasizes the need for policymakers to prioritize inclusive finance and implement targeted interventions to address the specific challenges and opportunities within each context.

Factors of regional financial inclusion in Morocco

The purpose of this paper is twofold: first, provide a comparative analysis of interregional and intraregional inequalities in terms of financial inclusion across Moroccan regions; second, explore the determinants of regional financial inclusion in a panel of 12 Moroccan regions. We used the principal component analysis methodology to construct our regional financial inclusion indexes, and the panel data estimation methodology to identify the determinants of regional financial inclusion. Our regional financial inclusion index shows that the majority of regions have a low level of financial inclusion. This is symptomatic of a very asymmetric distribution. For all regions, we found that intraregional inequalities in access to bank branches by locality/province or prefecture increase as we move away from the region’s main city. Empirical results indicated that a region’s human development level, as proxied by the Human Development Index (HDI), the size of its population, and the industrialization level of its economic fabric are the main determinants of a region’s financial inclusion level. The Moroccan financial system authorities have implemented several reforms (the banking law no. 2‐91‐967 of July 21, 1993) and strategies (National Financial Inclusion Strategy) aimed at promoting financial inclusion in Morocco; however, the increase in the level of financial inclusion at the macrolevel has not benefited all segments of the Moroccan population. This paper is original as, to our knowledge, it is the first to mobilize interregional and intraregional data, as opposed to previous studies that are national‐level oriented. Given the mapping of interregional and intraregional inequalities in access to, and use of, formal financial services, policymakers can rely on our index to formulate useful financial inclusion policies and to target rural localities, provinces or prefectures, and priority regions in Morocco’s National Financial Inclusion Strategy. The financial system should provide financial services tailored to regional financing needs. Moroccan policymakers should focus on filling gaps in levels of regional human development, as the latter is a key factor in regional financial inclusion.

Measuring Financial Inclusion Index for Developing Countries

This research focuses on the multifaceted realm of financial inclusion within Developing Countries. It unfolds a meticulous exploration by formulating a financial inclusion index based on data extracted from a sample comprising 75 Developing Countries, spanning the period from 2010 to 2018. The index's creation comprises of two distinct stages. In stage one, a principal component analysis is applied to derive sub-indices encapsulating the dimensions of access, utilization of financial services, technological advancements, and infrastructure, drawing from an array of 24 financial indicators. Subsequently, the second stage normalizes values within each dimension, culminating in an overall index through the application of the Euclidean Formula. The findings of this study emphasized the pivotal role of a National Financial Inclusion Strategy in enhancing financial inclusion in each respective country. Customization of these strategies to align with specific economic goals of each nation is paramount. Central to these objectives are primary priorities, which diverge among countries. Notably, countries like Romania, Serbia, and Mauritius place a premium on fostering financial literacy, while others such as Pakistan, Costa Rica, Rwanda, and Guinea emphasize the growth of Small and Medium Enterprises. In contrast, nations like Guatemala, Mauritania, Thailand, and Ukraine concentrate on expanding their financial networks. Furthermore, countries grappling with low levels of financial inclusion attribute this challenge to factors such as deficient financial literacy, the absence of a well-defined financial inclusion strategy, financial constraints, a preference for traditional financial services, and limited awareness surrounding digital innovations. Conversely, nations boasting moderate levels of financial inclusion, yet not progressing towards higher levels, point to the dearth of technological innovation and restricted prudential measures as pivotal stumbling blocks. This comprehensive analysis underscores the necessity of dynamic strategies tailored to individual countries to achieve robust financial inclusion on a global scale.

Gender disparity and Digital Financial inclusion in Advancing the Attainment of Sustainable Development Goals in Developing Countries

Purpose: Digital financial services delivered through fintech have grown substantially in developing countries to address the issues of access, affordability, and usage that cripple financial inclusion in these countries. Despite the growth of digital financial services researchers continue to lament the problem of financial inclusion for women. Researchers continue to allude to most women being digitally financially excluded in developing countries. Through a systematic literature review, this study sought to establish the challenges explaining the digital financial exclusion of women or the continued low levels of financial inclusion in developing countries. In addition, the paper sought to unpack how the digital financial inclusion or exclusion of women could impact the realization of the United Nations 2030 Sustainable Development Goals. Methodology: The paper adopted a systematic review approach. Literature on the subject was gathered from Scopus indexed journals, reviewed and synthesized Findings: The research established that factors such as digital, social, and financial inclusion, taxation of DFS, socioeconomic and sociocultural challenges as well literacy challenges, and regulatory and legal factors were responsible for the financial and digital financial exclusion of women, thus expanding the gender gap. Digital financial inclusion was found to be critical for economic development and the fruition of SDGs because women spend more on family, and development and generally save better than men. Originality/Value: Digital financial inclusion and financial inclusion are very fundamental to sustainable development and the accomplishment of the SDGs globally and more so in developing countries. Developing countries face an array of challenges toward achieving sustainable development and economic growth. These challenges include poverty and extreme poverty, corruption, resources shortages, lower levels of development, unemployment, and inequality as well as the financial exclusion of vulnerable groups of the population. While several studies have explored challenges of financial inclusion in developing countries, there is a dearth in literature that explores the intersection between digital financial inclusion or exclusion of women in developing countries and the realization of the SDGs. This paper sought to address this void by imploring the intersection between gender disparity and digital financial inclusion as these concern the realization of SDGs in developing economies.

INSTITUTIONAL AND SEGMENTAL ASPECTS OF UKRAINE’S FINANCIAL MARKET DIGITALIZATION

The article deals with the development analysis of certain segments of Ukraine’s financial market in the context of digitalization processes. The positions of modern foreign and domestic scientists regarding the digitalization impact on economic and financial relations are outlined. The key disproportions of the financial market at the institutional and segmental levels are highlighted. In particular, at the institutional level – the long-term and unchallenged dominance of banks over non-banking financial institutions; absence or minimal development of certain types of financial institutions; weakness of stock exchanges and exchange infrastructure in general; low level of financial inclusion. At the segmental level – imbalances in the lending market development, insufficient volume of the corporate securities market; weakness of leasing lending segments, factoring services, etc. It is argued that in the post-war reconstruction of Ukraine, the financial market should become an effective mechanism for the distribution of capital, therefore it is important to conceptually change the emphasis in its development on the digital technologies basis. It has been established that nowadays, the participants of various segments of the financial market are adapting their own strategies to the digital economy’s requirements. However, the degree of such adaptation and digitization level of certain segments of the financial market of Ukraine differ significantly. These disparities largely determine the strategic prospects of various segments of the domestic financial market. A similar conclusion was made regarding the digitalization strategy of financial institutions in Ukraine. For many financial institutions, the digitization of operations has become one of the important competitive advantages, but there are other approaches – in particular, in terms of digital technologies’ use for unfair competition and systemic violations of the rights of investors and consumers of financial services.

Financial Inclusion and Women-Led Small and Medium Enterprises (SMEs) Performance during Covid-19 in Chipadze, Bindura Town

Covid-19 containment measures disrupted the three financial inclusion dimensions of access, usage and quality, which affected women-led small and medium enterprises (SMEs) performance in many economies with no exception to Zimbabwe. However, the growth of small businesses depends mainly on the quality and accessibility of finance. This study examines the impact of financial inclusion on women-led SMEs performance in Bindura, Zimbabwe’s one of the mining towns during the Covid-19 era. A sample of 70 women-led businesses was selected, and data were analysed using a simple multivariate regression model. The results show a relatively low level of financial inclusion of women entrepreneurs in Bindura, having active formal bank accounts reflected by a percentage of 62.9. The study found that financial services were difficult to access, expensive and of poor quality during the Covid-19 era. Nonetheless, the study revealed significant positive effects between financial inclusion dimensions (accessibility, usage and quality) and entrepreneurial performance. Despite Covid-19 disruptions that made financial services challenging to access and of poor quality, financial inclusion was instrumental in enabling positive business performance. It is recommended that measures aimed at increasing the inclusivity of women-led businesses be fostered. These measures should be designed in a way that they make the services accessible and of good quality during the pandemic periods.

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l security at various levels of the economic system come to the fore, from the finances of individual households to national finances. As the practice of developed countries shows, one of the main drivers of financial security is the implementation of the principles of financial inclusion. After all, financial inclusion, combined with confidence in the financial and credit system by the population and business, is the stimulus for directing savings to the investment sphere, reducing the shadowing of the economy, increasing financial stability of economic entities, and, consequently, increasing government revenue and financial security. Purpose. The aim of the study is to improve the theoretical and methodological foundations and practical tools for identifying problems and effective ways to spread financial inclusion in Ukraine during the war. Results. Theoretical approaches to defining the essence of the concept of financial inclusion are considered. The content of financial inclusion as universal access of the population to a wide range of financial services, the most common of which are banking services, is revealed. The quantitative characteristics of financial inclusion in Ukraine during the wartime are considered and the generally unsatisfactory level of financial awareness, financial inclusion and access of the population to basic financial services is noted. It is determined that financial inclusion, combined with confidence in the financial and credit system by individuals and businesses, is a stimulus for directing savings to investment, reducing the shadowing of the economy, increasing financial stability of economic entities, and, consequently, increasing level of government revenues and financial security. Theoretical and methodological principles of spreading financial inclusion as a driver of financial security of Ukraine are studied. Risks threatening financial stability and tools for their minimization in Ukraine are analyzed. Conclusions. The research shows that the spread of financial inclusion in Ukraine today does not meet the requirements of the modern economically developed world. Thus, the low level of financial inclusion does not allow the state to fully use the powerful resource of savings, promotes the development of the shadow sector, which ultimately reduces the level of financial security in general. The high uncertainty caused by the war also makes it difficult to predict economic processes with reasonable probability. Therefore, the National Bank may temporarily refrain from publishing its own macroeconomic forecasts.

Determinants of Financial Inclusion of Rural Agricultural Households in India

Using nationally representative survey data from 21,648 rural agricultural households, the current study investigates the financial inclusion level among distinct social groups across the major Indian States. The results show that 18.49 per cent of rural agricultural households have no access to formal institutions. Rural agriculture households are more financially included from the banks (78.37 per cent) compared to the post offices (15.39 per cent). Findings further exhibit the low level of financial inclusion and prevailing inequality for financial access among socially disadvantaged groups. Open category agricultural households show a relatively high financial inclusion level compared to socially disadvantaged groups. A logistic regression model is applied to examine the factors influencing the degree of financial inclusion of rural agricultural households, which reveals some interesting facts. The level of financial inclusion from banks and post offices increases with education level, size of landholdings, age, and households belonging to the open category, among others. Further, the chances are high for financial inclusion of men, while the presence of post office increases the probability of financial inclusion of women.

ВПЛИВ ФІНАНСОВОЇ ІНКЛЮЗІЇ НАСЕЛЕННЯ НА РІВЕНЬ НЕЗАКОННО ОТРИМАНИХ ДОХОДІВ КРАЇН З РІЗНИМ РІВНЕМ ЕКОНОМІЧНОГО РОЗВИТКУ

Анотація. Вагомість розуміння того, чому і наскільки важливою є фінансова інклюзія, полягає у визнанні факту, що фінанси або фінансовий розвиток відіграють важливу роль під час формування економічної стабільності. За міжнародною оцінкою, фінанси здійснюють позитивний вплив на економіку через найважливіші функції, які вони виконують: виробництво інформації; розподіл капіталу для виробничого використання; контроль інвестицій і корпоративний контроль; мобілізація та об’єднання заощаджень; сприяння торгівлі, диверсифікації та управлінню ризиками; полегшення обміну товарами та послугами. Таким чином, можна визначити, що фінансовий розвиток країни залежить від виконання вищезазначених функцій. Для регуляторів і держави в цілому фінансова інклюзія є інструментом зменшення рівня «тіньової» економіки, через яку відбувається відмивання незаконно отриманих доходів, уникнення сплати податків тощо. Важливо зазначити, що низький рівень фінансової інклюзії переважно є проблемою економік держав, що розвиваються, хоча розвинуті країни також зіштовхуються з такими викликами. Розроблено та обґрунтовано вплив фінансової інклюзії населення на рівень незаконно отриманих доходів країн із різним рівнем економічного розвитку. Дослідження проводилося в кілька етапів: формування масиву показників, які характеризують фінансову інклюзію населення та рівень незаконно отриманих доходів для 91 країни із різним рівнем економічного розвитку, визначення інтегрального індексу фінансової інклюзії населення на основі використання факторного аналізу, проведення кореляційно-регресійного аналізу функціональної залежності між інтегральним індексом фінансової інклюзії та його складовими і Базельським індексом відмивання коштів. У цілому, було виявлено, що рівень фінансової залученості населення позитивно впливає на боротьбу з відмиванням коштів у всіх досліджуваних країнах. Побудова множинної регресії із включенням до неї як незалежних змінних складових частин індексу фінансової інклюзії (активізація споживачів на ринку фінансових послуг, яка проявляється через активніше використання банківських послуг і Інтернет-ресурсів для купівлі та оплати необхідних товарів чи послуг, дозволяє скоротити обсяг відмивання коштів) дозволило підтвердити отриманий результат. Ключові слова: фінансова інклюзія, фінансова грамотність, незаконно отримані доходи, Базельський індекс відмивання коштів, економічний розвиток. Формул: 6; рис.: 3; табл.: 6; бібл.: 22.

The Role of Financial Inclusion in Eliminating Household Poverty: Evidence from the Rural Wa West District of Ghana

It has been acclaimed that financial inclusion is one sure way of moving the poor out of poverty. In Ghana, poverty levels are particularly high in the Northern regions. In the Wa West district of the Upper West Region, the poverty incidence rate is as high as 92.4% (GSS, 2015). In this study, the researchers survey 378 households across the Wa West district to ascertain and examine the level of poverty and financial inclusion among households. Specifically, we examine the extent to which financial inclusion affects household income in the district. The study confirmed high levels of poverty and extremely low levels of financial inclusion among households in the district. The findings showed that households that had less access to financial products and services, had low levels of household income making them poor. Our findings confirm that in our sample, financial inclusion is a significant factor in determining household income and by extension, poverty levels. Secondly, using ordinary least squares (OLS) estimation adjusting for robustness, we found that access to credit and withdrawal frequency significantly affect household expenditure, a proxy for poverty. We also found very low levels of education in our sample but ironically, the households did not consider education a major intervention to improve their standard of living, rather preferring farming and livestock support. We recommend that governments and other policymakers adopt a two-pronged approach by increasing financial inclusion in rural areas whilst tackling low poverty level issues.

Quantifying the Relationship Between GDP Per Capita and Inequality in the Balkan Region

Purpose:The paper aims to estimate the effect of inequality on the economic growth of Balkan countries for the period 2001-2017. In addition, the effect of capital stock on GDP per capita (GDPpc) for the Balkan countries was estimated. The low level of financial inclusion on the Balkan region produces an underinvestment of human capital and affects the low-income households, leading to an increase in inequality. Low levels of equality and capital stock negatively impact economic growth.

Financial Inclusion, Financial Frictions, and Economic Growth: Evidence from Africa

ABSTRACT This paper aims to first, develop an analytical framework that examines the role of financial inclusion in promoting investment and economic growth, through the reduction of financial imperfections and considering the heterogeneity of access to the financial system. When performing a comparative analysis of the levels of financial inclusion in Africa, we mobilize the principal component analysis methodology to build the African Financial Inclusion Index (AFIndex). To test the empirical validity of the analytical conclusions, we use a panel data regression technique on a database constituted of 33 African countries over the period 2004–2019. Based on model simulations, financial inclusion stimulates investment and economic growth. Empirical results provide evidence attesting to the fact that financial inclusion has a significant and positive impact on investment and economic growth in Africa. The AFIndex shows that most African economies have a low level of financial inclusion. Our model is original as it provides analytical evidence on the negative impact of financial exclusion on economic growth, emphasizing the vital role of financial inclusion for economic growth. The AFIndex is a useful tool for designing and evaluating policies and/or programs intended for promoting financial inclusion in Africa.

Does Financial Development Really Matter for Poverty Reduction in Africa?

This paper revisits the financial development–poverty nexus. The study builds a robust measure of financial development that captures the state of financial development in Africa. We adopt the measure for examining the relationship between 1996 and 2015. Our results agree with a priori expectation. Overall, we find a reducing effect of financial development on absolute poverty but this does not affect relative poverty. Private credit has a poverty-reducing effect; however, total financial development and financial inclusion do not affect poverty in African countries. Also, stability and efficiency increase poverty levels. Considering the low level of financial inclusion in the continent, it is likely that financial development will reduce poverty in the continent if the poor can access credits. Our results should be interpreted with caution, the commercial banking model may not adequately address poverty in Africa. Hence, much should not be expected in policy circles from financial development for poverty reduction in the present state of financial development in Africa.

Financial inclusion and stability in the Asian region using bank-level data

Financial inclusion drives human development by supporting inclusive growth, economic development, and financial deepening. It has become a key enabler in reducing poverty and boosting prosperity. Financial inclusion can provide billions of currently unbanked adults with access to and active use of affordable financial products and services for their needs from transactions, payments, savings, credit, and insurance. The Asian region is generally considered to have a low level of financial inclusion. In addition, financial inclusion has mostly been ignored in current academic studies on the region. The governments in the region have expressed their concerns about macroeconomic instability associated with extensive financial inclusion. As such, this paper examines the linkage between financial inclusion and financial market stability using a dataset of 3071 banks in the Asian region over the period from 2008 to 2017. This paper uses a generalized method of moments (GMM) approach. Findings in this paper indicate that the higher level of financial inclusion from providing access to banking facilities contributes positively and significantly to stability in the banking sector, leading to greater bank resilience. Financial inclusion can help banks increase revenue, reduce cost, and expand their market share. Policy implications are outlined based on the findings in this paper.

Business Education: Key for Achieving Financial Inclusion in Palestine

Financial education is the process of building knowledge, skills and attitudes to become financially literate. It is meant to educate people on good money management practices with respect to earning, spending, saving, borrowing, and investing. Financial education is meant to enable people to shift from reactive to proactive decision-making and work towards fulfilling their financial goals. By broadening people’s understanding of financial options and principles, financial education builds skills to use financial products and services, and promotes attitudes and behaviors that support more effective use of scarce financial resources. Financial education builds skills to use financial products and services, and promotes attitudes and behaviors that support more effective use of scarce financial resources and financial inclusion. The results of this work show that low levels of financial inclusion are associated with lower levels of financial literacy. Recent research permitted to identify various ways in which policy makers are developing financial education policies for financial inclusion.

ISLAMIC SOCIAL FUNDS: ENABLING THE UNABLE TO BE ABLE

The low level of financial inclusion for the poor becomes a time bomb amid Islamic finance growth as an alternative and way of life, particularly for those who believe in the application of Islamic tenets in finance. Further, the evolving of fully-fledged Islamic Financial Non-Bank Institutions, particularly Islamic Microfinance Financial Institutions (IMFIs) are one of the myriad ways in alleviating poverty. Indonesia, with the highest number of the Muslim population in the world, can reduce the poverty percentage by using Islamic social funds, namely infaq, zakah, shadaqoh and waqf. This study sheds light on how to optimise the Islamic social fund benefit for improving the poor’s quality of life; both by injecting money to provide them with a business skill and to feed people them who are poor. We use meta-analysis method to recap different findings related to maximise the usage of Islamic social funds across a different point of view, hence a fit mechanism is found to be applied. It found that Islamic social funds can be used to sustain the fund whilst enabling the poor for generating income by integrating the fund with economics activities.

Fintech and Credit Scoring for the Millennials: Evidence using Mobile and Social Footprints

We use unique and proprietary data from a large Fintech lender to analyze whether alternative data captured from an individual's mobile phone (mobile/social footprint) can substitute for traditional credit bureau scores and improve financial inclusion. Variables that measure a borrowers' digital presence, such as the number and types of apps installed, measures of social connections and borrowers' deep social based on call logs, significantly improve default prediction and outperform the credit bureau score. Using machine learning-based prediction counterfactual analysis, we fi nd that alternate credit scoring based on the mobile and social footprints can expand credit access for individuals who lack credit scores without adversely impacting the default outcomes. The marginal benefit of using alternative data for credit decisions are likely to be higher for borrowers with low levels of income and education, as well as borrowers residing in regions with low levels of financial inclusion.

FEATURES OF FORMATION AND APPLICATION OF FINANCIAL MONITORING SYSTEM IN UKRAINE

The article is devoted to the study of peculiarities of formation and development of the national system of financial monitoring in the context of Preventing and Combining the Money Legalization (Laundering) and / or Terrorism Financing (AML / CFT). The basic approaches to the definition of the essence of the concept of «financial monitoring» are systematized according to the level of its conduct, and legal aspects of AML / CFT regulation in Ukraine are disclosed. The main functions of financial monitoring, including organizational and managerial, control and supervision, operational-analytical, informative and preventative are identified. The results of the activity of the State Financial Monitoring Service of Ukraine are reviewed, which confirm that the banking sector is the most financially powerful channel of illegal flows. In turn, financial monitoring of the non-banking sector is characterized by low institutional performance. The article provides a list of financial transactions that are most commonly associated with the illicit legalization of income, including cash transactions and transactions related to obtaining or providing financial assistance. It is determined that the key problems of establishing a system of financial monitoring in Ukraine are: contradictory conditions of state-building processes (weakness of law enforcement and judicial authorities); imbalance of regulation of business activity (complexity and duration of starting a business, high level of tax burden); peculiarities of investment policy; low level of financial inclusion in Ukraine. Given the international experience of developed countries, it is advisable to expand the list of financial crimes related to AML / CFT in accordance with the FATF Recommendations; strengthen interagency coordination and create a unified information exchange system; reinforce the personal responsibility of officials. The main directions of realization of the concept of development of the financial monitoring system in Ukraine should be: intensification of international cooperation; improvement of mechanisms for identification and disclosure of suspicious transactions, elimination of «blind zones» or disorderly allocation of competences; In addition, the main task of conducting internal financial monitoring at the bank level should be use the tools «customer due diligence / enhanced due diligence», as well as «know you client / know your customer's customer», in order to ensure transparency (legality) of relationships with counterparties.

El mercado de factura electrónica - justificación de su creación legal desde el Análisis Económico del Derecho

El presente artículo de investigación es el resultado de la reflexión personal del autor acerca de los factores económicos y jurídicos que impulsaron al Gobierno de Colombia –Ministerio de Comercio, Industria y Turismo– a expedir un serie de normativas encaminadas a la creación de un mercado electrónico de facturas. El presente estudio descriptivo y explicativo se desarrolla bajo el análisis de la normativa expedida sobre el particular y sobre las condiciones de mercado existentes, haciéndose evidente un bajo nivel de inclusión financiera, así como el problema generalizado en la obtención de financiamiento externo por parte de las pequeñas y medianas empresas en Colombia, lo que impulsó una política pública de intervención en los mercados a fin de corregir las fallas expuestas, buscando generar fuentes alternativas de financiamiento para el segmento de pequeñas y medianas empresas en Colombia.

Financial Inclusion, Bank Concentration, and Firm Performance

Summary This study focuses on the impact of financial inclusion and bank concentration on the performance of firms in developing and emerging countries. Using firm-level data for a sample of 55,596 firms in 79 countries, we find that financial inclusion, i.e., the distribution of financial services across firms, has a positive impact on firm growth. This positive impact is magnified when bank markets are less concentrated, a proxy for more competition among banks. We also find that more competitive banks favor firm growth only at high levels of financial inclusion, while bank concentration is particularly favorable to foreign and state-owned firms and increases firm growth at low levels of financial inclusion. In countries with limited financial deepening, the quality of the banking system (financial inclusion and bank competition) may be as important in promoting firm performance as its overall size.