A Survey on Financial Inclusion: Theoretical and Empirical Literature Review

Shah, Shahid Manzoor and Ali, Amjad (2022): A Survey on Financial Inclusion: Theoretical and Empirical Literature Review.

Abstract

Recently, policymakers and researchers have shifted their attention toward financial inclusion to control poverty, the black economy, tax collection, and financial development. Empirical and Theoretical literature shows that financial inclusion has become a fundamental requirement for economic development. This study provides a detailed literature review covering recent development in financial inclusion among different nations as well as in different reigns. This study highlights the major factors which influence financial inclusion i.e., financial literacy, financial innovations, financial regulation, financial stability, income, information communication technology, gender differences, cost of financial services, economic conditions, and political situations. These indicators are different across countries which becomes the major reason for variations in financial inclusion among countries. This study also highlights some demand-side and supply-side factors of financial inclusion. This study suggests that availability, accessibility, and usage are the major dimensions of financial inclusion which are measured by saving, lending, no of ATMs, no of bank branches, and no. of bank accounts. The study also has several dimensions of financial inclusion for future research.

• Item Type: MPRA Paper
• Language: English
• Keywords: financial inclusion, financial technology, financial stability, financial institutions
• Subjects: G - Financial Economics > G1 - General Financial Markets > G10 - General; G - Financial Economics > G2 - Financial Institutions and Services > G20 - General

References

Acemoglu, D., Robinson, J. A., &Woren, D. (2012). Why nations fail: The origins of power, prosperity and poverty (Vol. 4). New York: Crown Publishers.

Adomako, S., Danso, A., & Ofori Damoah, J. (2016). The moderating influence of financial literacy on the relationship between access to finance and firm growth in Ghana. Venture Capital, 18(1), 43–61.

Aduda, J., & Kalunda, E. (2012). Financial inclusion and financial sector stability with reference to Kenya: A review of literature. Journal of Applied Finance and Banking, 2(6), 95.

Agarwal, A. (2010). Financial inclusion: Challenges & opportunities. Skoch Summit, 5-6.

Aggarwal, S., & Klapper, L. (2013). Designing government policies to expand financial inclusion: Evidence from around the world. The Journal of Finance, 56(3), 1029 51.

Akhtar, S., & Pearce, D. (2010). Microfinance in the Arab World: The challenge of financial inclusion.

Ali, A. (2015). The impact of macroeconomic instability on social progress: an empirical analysis of Pakistan. (Doctoral dissertation, National College of Business Administration & Economics Lahore).

Ali, A. (2018). Issue of Income Inequality Under the Perceptive of Macroeconomic Instability: An Empirical Analysis of Pakistan. Pakistan Economic and Social Review, 56(1), 121-155.

Ali, A. (2022). Determining Pakistan's Financial Dependency: The Role of Financial Globalization and Corruption. Journal of Business and Economic Options.

Ali, A. (2022). Financial Liberalization, Institutional Quality and Economic Growth Nexus: Panel Analysis of African Countries. Bulletin of Business and Economics.

Ali, A. (2022). Foreign Debt, Financial Stability, Exchange Rate Volatility and Economic Growth in South Asian Countries. Journal of Business and Economic Options.

Ali, A. and Bibi, C. (2017). Determinants of Social Progress and its Scenarios under the role of Macroeconomic Instability: Empirics from Pakistan. Pakistan Economic and Social Review 55 (2), 505-540.

Ali, A., & Audi, M. (2018). Macroeconomic Environment and Taxes Revenues in Pakistan: An Application of ARDL Approach. Bulletin of Business and Economics (BBE), 7(1), 30-39.

Ali, A., & Rehman, H. U. (2015). Macroeconomic instability and its impact on the gross domestic product: an empirical analysis of Pakistan. Pakistan Economic and Social Review, 285-316.

Ali, A., Ahmed, F., & Rahman, F. U. (2016). Impact of Government Borrowing on Financial Development (A case study of Pakistan). Bulletin of Business and Economics (BBE), 5(3), 135-143.

Allen, F., Demirguc-Kunt, A., Klapper, L., & Peria, M. S. M. (2016). The foundations of financial inclusion: Understanding ownership and use of formal accounts. Journal of financial Intermediation, 27, 1-30.

Anson, J., Berthaud, A., Klapper, L. F., & Singer, D. (2013). Financial inclusion and the role of the post office. World Bank Policy Research Working Paper, (6630).

Atkinson, A., & Messy, F. A. (2013). Promoting financial inclusion through financial education: OECD/INFE evidence, policies and practice.

Audi, M., Ali, A., & Al-Masri, R. (2022). Determinants of Advancement in Information Communication Technologies and its Prospect under the role of Aggregate and Disaggregate Globalization. Scientific Annals of Economics and Business.

Audi, M., Ali, A., & Roussel, Y. (2021). The Advancement in Information and Communication Technologies (ICT) and Economic Development: A Panel Analysis. International Journal of Innovation, Creativity and Change, 15(4), 1013-1039.

Ayyagari, M., & Beck, T. (2015). Financial inclusion in Asia: An overview. Asian Development Bank Economics Working Paper Series, (449).

Banka, H. (2014). M-PESA at the point of sale: Expanding financial inclusion and reducing demand for physical cash. Journal of Payments Strategy & Systems, 7(4), 359-369.

Barman, D., Mathur, H. P., & Kalra, V. (2009). Role of microfinance interventions in financial inclusion: A comparative study of microfinance models. Vision, 13(3), 51-59.

Beck, T. (2016). Financial Inclusion–Measuring progress and progress in measuring. In This paper was written for the Fourth IMF Statistical Forum “Lifting the Small Boats: Statistics for Inclusive Growth. Cass Business School, City, University of London, CEPR, and CESifo

Beck, T., Demirgüç-Kunt, A., & Levine, R. (2007). Finance, inequality and the poor. Journal of economic growth, 12(1), 27-49.

Beck, T., Senbet, L., & Simbanegavi, W. (2015). Financial inclusion and innovation in Africa: An overview. Journal of African Economies, 24(suppl_1), i3-i11.

Beck, T., Senbet, L., & Simbanegavi, W. (2015). Financial inclusion and innovation in Africa: An overview. Journal of African Economies, 24(suppl_1), i3-i11.

Birkenmaier, J., & Fu, Q. (2018). Household financial access and use of alternative financial services in the US: Two sides of the same coin? Social Indicators Research, 139(3), 1169-1185.

Bold, C., Porteous, D., &Rotman, S. (2012). Social cash transfers and financial inclusion: Evidence from four countries (Consultative Group to Assist the Poor, No. 77), pp. 1–28. Washington, DC: CGAP.

Bongomin, G. O. C., Munene, J. C., Ntayi, J. M., & Malinga, C. A. (2018). Analyzing the relationship between institutional framework and financial inclusion in rural Uganda: a social network perspective. International Journal of Emerging Markets.

Bozkurt, İ., Karakuş, R., &Yildiz, M. (2018). Spatial determinants of financial inclusion over time. Journal of International Development, 30(8), 1474-1504.

Burgess, R., & Pande, R. (2005). Do rural banks matter? Evidence from the Indian social banking experiment. American Economic Review, 95(3), 780-795.

Burton, D. (2018). The US racial wealth gap and the implications for financial inclusion and wealth management policies. Journal of Social Policy, 47(4), 683-700.

Chakravarty, S. R., & Pal, R. (2013). Financial inclusion in India: An axiomatic approach. Journal of Policy modeling, 35(5), 813-837.

Chattopadhyay, S. K. (2011). Financial inclusion in India: A case-study of West Bengal.

Chen, R., & Divanbeigi, R. (2019). Can Regulation Promote Financial Inclusion? World Bank Policy Research Working Paper, (8711).

Chibba, M. (2009). Financial inclusion, poverty reduction and the millennium development goal. The European Journal of Development Research, 21(2), 213-230.

Chikalipah, S. (2017). What determines financial inclusion in Sub-Saharan Africa? African Journal of Economic and Management Studies.

Chinoda, T., &Kwenda, F. (2019). Do mobile phones, economic growth, bank competition and stability matter for financial inclusion in Africa? Cogent Economics & Finance.

Cohen, M., & Nelson, C. (2011). Financial literacy: A step for clients towards financial inclusion. Global Microcredit Summit, 14-17.

Collard, S. (2007). Toward financial inclusion in the UK: Progress and challenges. Public Money and Management, 27(1), 13-20.

Comparato, G. (2015). The rationales of financial inclusion in the changing European private law. European Review of Contract Law, 11(1), 22-45.

Cull, R., Demirgüç-Kunt, A., & Lyman, T. (2012). Financial inclusion and stability: what does research shows?

De Matteis, L. (2015). Financial inclusion. Policies and instruments for migrants in Italy. Savings and Development, 39-69.

Deku, S. Y., Kara, A., & Molyneux, P. (2016). Access to consumer credit in the UK. The European Journal of Finance, 22(10), 941-964.

Demirgüç-Kunt, A., & Singer, D. (2017). Financial inclusion and inclusive growth: A review of recent empirical evidence. World Bank Policy Research Working Paper, (8040).

Demirgüç-Kunt, A., Kane, E. J., & Laeven, L. (2014). Deposit insurance database (No. w20278). National Bureau of Economic Research.

Dias, D., & McKee, K. (2010). Protecting branchless banking consumers: Policy objectives and regulatory options. Focus Note, 64(64), 20.

Diniz, E., Birochi, R., & Pozzebon, M. (2012). Triggers and barriers to financial inclusion: The use of ICT-based branchless banking in an Amazon County. Electronic Commerce Research and Applications, 11(5), 484-494.

Donovan, K. (2012). Mobile money for financial inclusion. Information and Communications for development, 61(1), 61-73.

Emara, N., & El Said, A. (2021). Financial inclusion and economic growth: The role of governance in selected MENA countries. International Review of Economics & Finance,75, 34 54.

Evans, O. (2018). Connecting the poor: the internet, mobile phones and financial inclusion in Africa. Digital Policy, Regulation and Governance.

Fernández-Olit, B., Martín, J. M. M., & González, E. P. (2019). Systematized literature review on financial inclusion and exclusion in developed countries. International Journal of Bank Marketing.

Fonté, E. F. (2012). Mobile payments in the United States: How disintermediation may affect delivery of payment functions, financial inclusion and anti-money laundering issues. Wash. JL Tech. & Arts, 8, 419.

Fungáčová, Z., & Weill, L. (2015). Understanding financial inclusion in China. China Economic Review, 34, 196-206.

Gabor, D., & Brooks, S. (2017). The digital revolution in financial inclusion: international development in the fintech era. New political economy, 22(4), 423-436.

Ghosh, J. (2013). Microfinance and the challenge of financial inclusion for development. Cambridge journal of economics, 37(6), 1203-1219.

Godinho, V., & Singh, S. (2013, September). Technology enabled financial inclusion and evidence-based policy for the underbanked: A study of remote Indigenous Australia. In CPRsouth8/CPRafrica2013 conference.

Grohmann, A., Klühs, T., & Menkhoff, L. (2018). Does financial literacy improve financial inclusion? Cross country evidence. World Development, 111, 84-96.

Halwe V. (2010), A study to understand the saving pattern and credit needs of the tribal families of Maharashtra and Gujarat State of India, BAIF Development Research Foundation.

Hannig, A., & Jansen, S. (2010). Financial inclusion and financial stability: Current policy issues.

Honohan, P. (2004). Financial sector policy and the poor: Selected findings and issues (No. 43). World Bank Publications.

Horska, E., Szafranska, M., & Matysik-Pejas, R. (2013). Knowledge and financial skills as the factors determining the financial exclusion process of rural dwellers in Poland. Agricultural Economics -ZemedelskaEkonomika, 59(1), 29-37

Hudon, M. (2009). Should access to credit be a right? Journal of business ethics, 84(1), 17-28.

Ibor, B. I., Offiong, A. I., &Mendie, E. S. (2017). Financial inclusion and performance of micro, small and medium scale enterprises in Nigeria. International Journal of Research, 5(3), 104-122.

Infelise, F. (2014). Supporting Access to Finance by SMEs: Mapping the initiatives in five EU countries.

Islam, K. J., & Simpson, W. (2018). Payday lending and microcredit: two faces of the same problem? Journal of International Development, 30(4), 584-614.

Johnson, S., & Arnold, S. (2012). Inclusive financial markets: is transformation under way in Kenya? Development Policy Review, 30(6), 719-748.

Kabakova, O., & Plaksenkov, E. (2018). Analysis of factors affecting financial inclusion: Ecosystem view. Journal of business Research, 89, 198-205.

Kapadia, S. (2019). A perspective on financial literacy and inclusion in India.

Kear, M. (2013). Governing homo subprimicus: Beyond financial citizenship, exclusion, and rights. Antipode, 45(4), 926-946.

Kim, D. W., Yu, J. S., & Hassan, M. K. (2018). Financial inclusion and economic growth in OIC countries. Research in International Business and Finance, 43, 1-14.

Kimmitt, J., & Munoz, P. (2017). Entrepreneurship and financial inclusion through the lens of instrumental freedoms. International Small Business Journal, 35(7), 803-828.

King, R. G., & Levine, R. (1993). Finance and growth: Schumpeter might be right. The quarterly journal of economics, 108(3), 717-737.

Koku, P. S., &Jagpal, S. (2015). Do payday loans help the working poor? International Journal of Bank Marketing.

Koomson, I., & Danquah, M. (2021). Financial inclusion and energy poverty: Empirical evidence from Ghana. Energy economics, 94, 105085.

Kosse, A., & Vermeulen, R. (2014). Migrants’ choice of remittance channel: do general payment habits play a role? World Development, 62, 213-227.

Kumar, N. (2013). Financial inclusion and its determinants: evidence from India. Journal of Financial Economic Policy.

Lai, J. T., Yan, I. K., Yi, X., & Zhang, H. (2020). Digital financial inclusion and consumption smoothing in China. China & World Economy, 28(1), 64-93.

Lentner, C., Vasa, L., &Hegedus, S. (2020). The Assessment of Financial Risks of Municipally Owned Public Utility Companies in Hungary Between 2009 and 2018. Montenegrin Journal of Economics, 16(4), 29-41.

Léon, F., & Zins, A. (2020). Regional foreign banks and financial inclusion: Evidence from Africa. Economic Modelling, 84, 102-116.

Levine, R., & Zervos, S. (1996). Stock market development and long-run growth. The world bank economic review, 10(2), 323-339.

Marron, D. (2013). Governing poverty in a neoliberal age: new labor and the case of financial exclusion. New Political Economy, 18(6), 785-810.

Marshall, J. N. (2004). Financial institutions in disadvantaged areas: a comparative analysis of policies encouraging financial inclusion in Britain and the United States. Environment and Planning A, 36(2), 241-261.

Mckinnon RI (1973) Money and Capital in Economic Development. Brookings Institute, Washington Shaw.

Mehrotra, A. N., & Yetman, J. (2014). Financial inclusion and optimal monetary policy.

Mhlanga, D. (2021). Financial inclusion in emerging economies: The application of machine learning and artificial intelligence in credit risk assessment. International Journal of Financial Studies, 9(3), 39.

Mitchell, K., & Scott, R. H. (2019). Public revenue, financial inclusion and value-added tax in Argentina. In Pesos or plastic? (pp. 33-58). Palgrave Pivot, Cham.

Mitton, L. (2008). Financial inclusion in the UK: Review of policy and practice. Joseph Rowntree Foundation.

Mohan, R. (2006). Economic growth, financial deepening and financial inclusion. Reserve Bank of India Bulletin, 1305.

Naceur, S. B., Barajas, A., & Massara, A. (2017). Can Islamic banking increase financial inclusion? In Handbook of empirical research on Islam and economic life. Edward Elgar Publishing.

Nanziri, E. L. (2016). Financial inclusion and welfare in South Africa: Is there a gender gap? Journal of African Development, 18(2), 109-134.

Ndebbio, J. E. U. (2004). Financial deepening, economic growth and development: Evidence from selected sub-Saharan African Countries.

Neaime, S., &Gaysset, I. (2018). Financial inclusion and stability in MENA: Evidence from poverty and inequality. Finance Research Letters, 24, 230-237.

Nega, F., & Hussein, E. (2016). Small and medium enterprise access to finance in Ethiopia: Synthesis of demand and supply.

Oshora, B., Desalegn, G., Gorgenyi-Hegyes, E., Fekete-Farkas, M., & Zeman, Z. (2021). Determinants of Financial Inclusion in Small and Medium Enterprises: Evidence from Ethiopia. Journal of Risk and Financial Management, 14(7), 286.

Óskarsdóttir, M., Bravo, C., Sarraute, C., Baesens, B., & Vanthienen, J. (2020). Credit scoring for good: Enhancing financial inclusion with smartphone-based microlending. arXiv preprint arXiv:2001.10994.

Ouma, S. A., Odongo, T. M., & Were, M. (2017). Mobile financial services and financial inclusion: Is it a boon for savings mobilization? Review of development finance, 7(1), 29-35.

Ozili, P. K. (2018). Impact of digital finance on financial inclusion and stability. Borsa Istanbul Review, 18(4), 329-340.

Ozili, P. K. (2019). Blockchain finance: Questions regulators ask. In Disruptive innovation in business and finance in the digital world. Emerald Publishing Limited.

Park, C. Y., & Rogelio Jr, V. Mercado Jr. 2015. “Financial Inclusion, Poverty, and Income Inequality in Developing Asia.” (No. 426). ADB Economics Working Paper Series.

Pati, A. P. (2009). Enhancing financial inclusion: The catalytic role of self-help groups. The Management Accountant, May.

Pearce, D. (2011). Financial inclusion in the Middle East and North Africa: Analysis and roadmap recommendations. World Bank policy research working paper, (5610).

Polillo, S. (2011). Money, moral authority, and the politics of creditworthiness. American Sociological Review, 76(3), 437-464.

Pollin, J. P., & Riva, A. (2002). Financial inclusion and the role of postal systems. In Modernization and privatization of postal systems in Europe (pp. 213-252). Springer, Berlin, Heidelberg.

Popescu, A. D. (2019). Empowering Financial Inclusion through FinTech. Social Sciences and Education Research Review, 6(2), 198-215.

Ramakrishnan, D. R. (2012, June). Financial literacy and financial inclusion. In 13th Thinkers and writers Forum.

Ruiz-Porras, A. (2009). Financial structure, financial development and banking fragility: International evidence. Análisis Económico, 24(56), 147-173.

Salignac, F., Marjolin, A., Reeve, R., & Muir, K. (2019). Conceptualizing and measuring financial resilience: A multidimensional framework. Social Indicators Research, 145(1), 17-38.

Salignac, F., Muir, K., & Wong, J. (2016). Are you really financially excluded if you choose not to be included? Insights from social exclusion, resilience and ecological systems. Journal of Social Policy, 45(2), 269-286.

Sarma, M. P. Jesim (2011). “Financial Inclusion and Development”. Journal of International Development, 23(5), 613-628.

Serrao, M. V., Sequeira, A. H., & Hans, B. (2012). Designing a methodology to investigate accessibility and impact of financial inclusion. Household finance e-journal-CMBO.

Sharma, D. (2016). Nexus between financial inclusion and economic growth: Evidence from the emerging Indian economy. Journal of financial economic policy.

Shetty, S., & Hans, V. (2018). Women empowerment in India and financial inclusion barriers. International Journal of Management Sociology and Humanities, 9(3).

Simpson, W., & Buckland, J. (2016). Dynamics of the location of financial institutions: Who is serving the inner city? Economic Development Quarterly, 30(4), 358-370.

Sinclair, S. (2013). Financial inclusion and social financialization: Britain in a European context. International Journal of Sociology and Social Policy.

Triki, T., & Faye, I. (2013). Financial inclusion in Africa. African Development Bank.

Turegano, D. M., & Herrero, A. G. (2018). Financial inclusion, rather than size, is the key to tackling income inequality. The Singapore Economic Review, 63(01), 167-184.

Usman, M., Makhdum, M. S. A., & Kousar, R. (2021). Does financial inclusion, renewable and non-renewable energy utilization accelerate ecological footprints and economic growth? Fresh evidence from 15 highest emitting countries. Sustainable cities and society, 65, 102590.

Yangdol, R., & Sarma, M. (2019). Demand-side factors for financial inclusion: A cross-country empirical analysis. International Studies, 56(2-3), 163-185.