Fault Lines in Financial Inclusion

Ozili, Peterson K (2022): Fault Lines in Financial Inclusion. Published in:

Abstract

Financial inclusion has been a global development policy priority over the last two decades. Financial inclusion involves providing access to basic financial services and the use of basic financial services to improve the welfare of individuals, households, and businesses. This article identifies the fault lines or vulnerabilities in the way financial inclusion is achieved. These fault lines or vulnerabilities arise from the over-reliance on profit-oriented financial institutions to achieve financial inclusion, the multiple self-interest in the financial inclusion agenda, the unsustainability of policy-induced demand for basic financial services, the lack of safety net to protect poor banked adults from systemic risk events, and the prevalence of financial inclusion-washing that allow agents to misrepresent their support for financial inclusion. The article argued that the world needs to pay serious attention to these fault lines and seek solutions that promote financial inclusion in a sustainable way. The ideas in this article can help policymakers, academics, practitioners, and researchers in assessing the fault lines created by financial inclusion policies and strategies as this is the first step to finding solutions to address the fault lines.

• Item Type: MPRA Paper
• Language: English
• Keywords: Access to finance, banked adults, fault lines, financial inclusion, financial institutions, formal account.
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages; G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I31 - General Welfare, Well-Being

References

Ahamed, M. Mostak and Sushanta K. Mallick. 2019. “Is financial inclusion good for bank stability? International evidence.” Journal of Economic Behavior & Organization 157:403–427.

Ali, Abd elrahman Elzahi Saaid. 2017. “The challenges facing poverty alleviation and financial inclusion in North East Kenya Province (NEKP).” International Journal of Social Economics 44(12):2208–2223.

Botric, Valerija and Tanja Broz. 2017. “Gender differences in financial inclusion: Central and South Eastern Europe.” South-Eastern Europe Journal of Economics 15(2):209–227.

Chen, Zibei and Minchao Jin. 2017. “Financial inclusion in China: Use of credit.” Journal of Family and Economic Issues 38(4):528–540.

Collard, Sharon. 2007. “Toward financial inclusion in the UK: Progress and challenges.” Public Money and Management 27(1):13–20.

Danisman, Gamze Ozturk and Amine Tarazi. 2020. “Financial inclusion and bank stability: Evidence from Europe.” The European Journal of Finance 26(18):1842–1855.

Demirgüç-Kunt, Asli and Leora Klapper. 2013. “Measuring financial inclusion: Explaining variation in use of financial services across and within countries.” Brookings Papers on Economic Activity 2013(1):279–340.

Dev, S. Mahendra. 2006. “Financial inclusion: Issues and challenges.” Economic and political weekly 41(41):4310–4313.

Khan, Harun R. 2020. “Issues and challenges in financial inclusion: Policies, partnerships, processes and products.” Korea 18(2):84–117.

Kim, Dai-Won., Jung-Suk Yu, and M. Kabir Hassan. 2018. “Financial inclusion and economic growth in OIC countries.” Research in International Business and Finance 43:1–14.

Mani, Mukta. 2016. “Financial inclusion in South Asia—Relative standing, challenges and initiatives.” South Asian Survey 23(2):158–179.

Matekenya, Weliswa, Clement Moyo, and Leward Jeke. 2021. “Financial inclusion and human development: Evidence from Sub-Saharan Africa.” Development Southern Africa 38(5):683–700.