COVID-19 Global Pandemic, Financial Development and Financial Inclusion

Ojong, Nathanael and Asongu, Simplice (2021): COVID-19 Global Pandemic, Financial Development and Financial Inclusion.

Abstract

This chapter examines how the Covid-19 pandemic has affected financial development and financial inclusion in African countries. The study provides both broad perspectives and country-specific frameworks based on selected country cases studies. Some emphasis is placed on the achievement of sustainable development goals (SDGs) that are related to financial inclusion. The study aims to understand what immediate challenges the COVID-19 pandemic has represented to the economies and societies on the one hand and on the other, the effect of the COVID-19 on the interconnected financial systems in terms of consequences of the pandemic. The relevance of the study builds on the importance of these insights in helping both scholars and policy makers understand how the effect of the pandemic on the financial system and by extension, the global economy can be mitigated for more financial inclusion.

• Item Type: MPRA Paper
• Language: English
• Keywords: Covid-19 pandemic; financial development; Financial inclusion; Africa
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

References

African Development Bank [AfDB]. (2021). African Development Bank provides $1 million for AI-based national customer management systems in Ghana, Rwanda and Zambia. AfDB: Abidjan, press release, 10 March 2021.

Aldasoro, I, Frost, J., Gambacorta, L., & Whyte, D., (2021): “Covid-19 and cyber risk in the financial sector”, BIS Bulletin, no 37, January. https://www.bis.org/publ/bisbull37.pdf (Accessed: 31/10/2021).

Agur, I., Peria, S. M., & Rochon, C. (2020). Digital Financial Services and the Pandemic: Opportunities and Risks for Emerging and Developing Economies. In International Monetary Fund Special Issue on COVID-19.

Ahern, K. R., &Sosyura, D. (2014). Who writes the news? Corporate press releases during merger negotiations. Journalof Finance, 69(1), 241–291.

Aiyar, S., Bergthaler, W., Garrido, J., Ilyina, A., Jobst, A., Kang, K., Kovtun, D., Liu, Y., Monaghan, D., & Moretti. M., (2015). “A strategy for resolving Europe's problem loans.” IMF Staff Discussion Note No. 15/19. Washington, DC.

Aldasoro I., Frost I., Gambacorta L. & Whyte D. (2021). Covid-19 and cyber risk in the financial sector. BIS Bulletin #37. URL: https://www.bis.org/publ/bisbull37.htm.

Alfred, S., Maureen, T., & Were, M. (2017). Mobile financial services and financial inclusion: Is it a boon for savings mobilization?Review of Development Finance, 7(1), 29–35.

Ashimwe, E. (2020). Kigali based taxi-motos to use cashless payments from Mid-August, The New Times, https://www.newtimes.co.rw/news/kigali-based-taxi-motos-use-cashless-payments-mid-august(accessed on 6 October 2021)

Aslam, J.; Saleem, A.; Khan, N.T.& Kim, Y.B. (2021). Factors influencing blockchain adoption in supply chain management practices: Astudy based on the oil industry. Journal of Innovation & Knowledge, 6(2), 124–134.

Asongu, S. A. (2015). The Impact of Mobile Phone Penetration on African inequality, AGDI Working Paper, No. WP/13/021, African Governance and Development Institute (AGDI), Yaoundé.

Asongu, S. A., & Diop, S., & Nnanna, J., (2020). The geography of the effectiveness and consequences of Covid-19 measures: Global evidence. Journal of Public Affairs. DOI: 10.1002/pa.2483.

Asongu, S. A., & Le Roux, S. (2017). Enhancing ICT for Inclusive Human Development in Sub-Saharan Africa, Technological Forecasting and Social Change, 118, 44-54.

Association of Certified Fraud Examiners [ACFE]. (2020). Fraud in the wake of COVID-19: Benchmarking report. ACFE: Austin.

Berger, A. N., & Demirgüç-Kunt, A. (2021). Banking research in the time of COVID-19. Journal of Financial Stability, 57(December), 100939.

Bharadwaj, P.; Jack, W.& Suri, T. (2019). Fintech and Household Resilience to Shocks: Evidence from Digital Loans in Kenya;National Bureau of Economic Research: Cambridge, MA, USA.

Bizimungu, J. (2021). How Covid-19 pandemic triggered surge in cashless payments. The New Times, https://www.newtimes.co.rw/news/how-covid-19-pandemic-triggered-surge-cashless-payments (accessed on 6 October 2021)

Blaney, B., (2020). Chart-topping fintech stats for 2020. https://tipalti.com/fintech-stats-for-2020/. https://tipalti.com/

Bock, M. (2015). “WTF is an API? How the Internet Works Behind the Scenes”. Hackernoon, January 20.https://hackernoon.com/apis-how-the-internet-works-behind-the-scenes-690288634c32.

Carnegie Endowment for International Peace [CEIP]. (2021).Timeline of Cyber Incidents Involving Financial Institutions. https://carnegieendowment.org/specialprojects/protectingfinancialstability/timeline (accessed 8 October 2021)

Chen, M.A.; Wu, Q.& Yang, B. (2019). How valuable is Finttech innovation? Rev. Financ. Stud., 32, 2062–2106.

Clarke, J., Chen, H., Du, D., & Hu, Y. (2020). Fake news, investor attention, and market reactionInformation Systems Research, 32 (1) (2020), pp. 35-52

Coffie, C., Hongjiang, Z., Mensah, I., Kiconco, R& Simon, A. (2021). Determinants of FinTech payment servicesdiffusion by SMEs in Sub-Saharan Africa: evidence from Ghana, Information Technology forDevelopment, 27(3), 539-560.

Coffie, C. P. K., Zhao, H., & Mensah, I.A. (2020). Panel econometric analysis on mobile payment transactions and traditionalbanks effort toward financial accessibility in Sub-Sahara Africa. Sustainability, 12(3), 895.

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

Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2020). The global Findex Database 2017: Measuringfinancial inclusion and opportunities to expand access to and use of financial services. The World Bank EconomicReview, https://doi.org/10.1093/wber/lhz013

Deng, S., Huang, Z. (. J.)., Sinha, A. P., & Zhao, H. (2018). The interaction between microblog sentiment and stock returns: Anempirical examination. MIS Quarterly, 42(3), 895–918.

Diop, S., & Asongu, S. A., (2021). The Covid-19 Pandemic and the New Poor in Africa: The Straw That Broke the Camel’s Back. Forum for Social Economics, DOI: 10.1080/07360932.2021.1884583

Diop, S., Asongu, S. A., & Nnanna, J., (2021). COVID-19 economic vulnerability and resilience indexes: Global evidence. International Social Science Journal. DOI: 10.1111/issj.12276.

Drasch, B. J., Schweizer, A., &Urbach, N. (2018). Integrating the ‘troublemakers’: A taxonomy for cooperation betweenbanks and fintechs. Journal of Economics and Business, (March), 1–17.

Dubey, V., Sonar, R. and Mohanty, A. (2020), “FinTech, RegTech and contactless payments through the lens of COVID 19 times”, Money, Vol. 29 No. 6, pp. 3727-3734.

Economist Intelligence Unit [eiu]. (2021). Going digital: Payments in the post-Covid world. EIU: London.

Eldomiaty, T., Hammam, R., & El Bakry, R. (2020). Institutional determinants of financial inclusion: Evidence from world economies. International Journal of Development Issues, 19(2), 217-228.

Ezeaku, H., Asongu, S. A., & Nnanna, J., (2021). Volatility of international commodity prices in times of COVID-19: Effects of oil supply and global demand shocks. The Extractive Industries and Society, 8(1), 257-270.

Fabeil, N.F., Pazim, K.H. & Langgat, J. (2020). The impact of covid-19 pandemic crisis on MicroEnterprises: entrepreneurs’ perspective on business continuity and recovery strategy. Journal of Economics and Business, 3(2) (2020) https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3612830 (Accessed: 31/10/2021).

Financial Sector Deepening [FSD]. (2021). AnnualReport2020, https://www.fsdkenya.org/wp-content/uploads/2021/06/FSDK-Annual-Report-2020-Web.pdf (accessed 6 October 2021)

Financial Services Information Sharing and Analysis Center [FS-ISAC]. (2020). COVID-19 effects oncybersecurity survey, July.

Frame, W. S., Wall, L. & White, L. J. (2019). “Technological Change and Financial Innovation in Banking: Some Implications forFinTech.” In Oxford Handbook of Banking, 3rd ed., edited by A. Berger, P. Molyneux, and J. O. S. Wilson, 262–284. Oxford: Oxford University Press.

Giese, J. & Haldane, A. (2020). COVID-19 and the financial system: a tale of two crises. Oxford Review of Economic Policy, 36(S1), S200 – S214.

Gomber, P.; Kauffman, R.J.; Parker, C & Weber, B.W. (2018). On the Fintech revolution: Interpreting the forces ofinnovation, disruption, and transformation in financial services. J. Manag. Inf. Syst. 2018, 35, 220–265.

Gourinchas, P. O., Kalemli-Özcan, S.,Penciakova, V & Sander, N. (2020). Covid-19 and SME failures. NBER WorkingPaper Series. doi:10.3386/w27877

Huang, D., Jiang, F., Tu, J., & Zhou, G. (2015). Investor sentimentaligned: A powerful predictor of stock returns. Review ofFinancial Studies, 28(3), 791–837.

IFC. (2020). The early impact of COVID-19 on financial institutions, IFC: Washington, D.C.

Imerman, M. B & Fabozzi, F. J. (2020). Cashing in on Innovation: A Taxonomy of FinTech. Journal of Asset Management 21:167–77.

Kalemli-Özcan, S.,Laeven, L. & Moreno, D. (2020). Debt overhang, rollover risk, and corporate investment: Evidencefrom the European crisis. NBER Working Paper Series. doi: 10.3386/w24555.

Karlan, D., Kendall, J. Mann, R., Pande, R., Suri, T. & Zinman, J., (2016). Research and impacts of digital financial services, NBER Working Paper No. 22633, Cambridge.

Karsen, M., Chandra, Y. U., &Juwitasary, H. (2019). Technological factors of mobile payment:A systematic literature review. Procedia Computer Science, 157, 489–498.

Kasradze, T., (2020). Challenges Facing Financial Inclusion Due to the COVID-19 Pandemic. European Journal of Marketing and Economics, 3(2), 50-63.

Kietzmann, J.H., J. Paschen, J & Treen, E. (2018). Artificial intelligence in advertising: How marketers can leverage artificial intelligence along the consumer journey. Journal of Advertising Research, 58 (3) (2018), pp. 263-267.

Kogan, S., Moskowitz, T.J.,& Niessner, M. (2020). Fake news: Evidence from financial markets. Available athttps://papers.ssrn.com/sol3/papers.cfm?abstract_id=3237763

KPMG. (2019). The Pulse of Fintech 2019—Biannual Global Analysis of Investment in Fintech; KPMG: Zurich, Switzerland.

KPMG (2021). Implications of COVID-19 for Asset Management. KPMG International entities https://home.kpmg/xx/en/home/insights/2020/04/covid-19-impact-and-implications-to-asset-management.html (Accessed: 31/10/2021).

Li, X., Feng, H., Zhao, S., & Carter, D. (2021). The effect of revenue diversification on bank profitability and risk during the COVID-19 pandemic,Finance Research Letters, 101957

Lim, S.H.; Kim, D.J.; Hur, Y.& Park, K.(2019). An Empirical Study of the Impacts of Perceived Security and Knowledge on ContinuousIntention to Use Mobile Fintech Payment Services. International Journal of Human–Computer Interaction, 35(10), 886–898.

Morgan, P.J., Huang, B & Trinh, L.Q. (2019). The need to promote digital financial literacy for the digital ageRealizing Education for all: In the Digital Age, JICA and ADBI, Tokyo, Japan (2019), pp. 40-46.

Nurse, K. (2018). Migration, Diasporas, Remittances and the Sustainable Development Goals in Least Developed Countries. Journal of Globalization and Development, 9(2): 1-13.

Ozili, P. K. (2020). Financial Inclusion and Fintech during COVID-19 Crisis: Policy Solutions. SSRN Electronic Journal. doi:10.2139/ssrn.3585662

Panos, G& Wilson, J. O. S., (2020). Financial literacy andresponsible finance in the FinTech era: capabilities and challenges, The European Journal ofFinance, 26:4-5, 297-301.

Park, C-Y & Shin, K. (2021). COVID-19, nonperforming loans, and cross-border bank lending,Journal of Banking & Finance,106233.

PayU, (2021). The Next Frontier: the most promising markets for emerging e-commerce leaders in 2021 and beyond. PayU

Puschmann, T. Fintech. Bus. Inf. Syst. Eng. 2017, 59, 69–76.

Remolina, N. (2020), “Towards a data-driven financial system: the impact of COVID-19”, SMU Centre for AI & Data Governance, Research Paper, (08).

Riley, C. (2020) Unpacking interoperability in competition, Journal of Cyber Policy, 5:1, 94-106.

Signé, L and Signé, K. 2021. How African states can improve their cybersecurity. March 16, 2021, Brookings, https://www.brookings.edu/techstream/how-african-states-can-improve-their-cybersecurity/ (accessed 8 October 2021)

Talom, F. S. G., &Tengeh, R. K. (2020). The impact of mobile money on the financial performance of the SMEs in Douala,Cameroon. Sustainability, 12(1), 183.

Tardelli, S.,Avvenuti, M., Tesconi, M & Cresci, S. (2020). “Characterizing social bots spreading financial disinformation” InMeiselwitz, G (Ed.), Social computing and social media: Design, ethics, user behavior, and social network analysis lecture notes in computer science, Springer, Cham, Switzerland, pp. 376-392.

Tchamyou, V. S., (2019). The Role of Information Sharing in Modulating the Effect of Financial access on Inequality. Journal of African Business, 20(3), 317-338.

Tchamyou, V. S. (2020). Education, lifelong learning, inequality and financial access: Evidence from African countries. Contemporary Social Science, 15(1), 7-25.

Tchamyou, V. S. (2021). Financial access, governance and the persistence of inequality in Africa: Mechanisms and policy instruments. Public Affairs, 21(2), e2201.

Tchamyou, V.S., Erreygers, G., &Cassimon, D., (2019). Inequality, ICT and Financial Access in Africa. Technological Forecasting and Social Change, 139(February), 169-184.

Tetlock, P. C. (2015). The role of media in finance. In Handbook ofmedia economics (Vol. 1, pp. 701–721). Elsevier.

Tetlock, P. C. (2014). Information transmission in finance. AnnualReview of Financial Economics, 6(1), 365–384.

UNCDF. (2021). Research on Small and Micro Merchants Payments Digitization in Africa. UNCDF: Brussel

Wamba, F., S.; Kamdjoug, K.,Bawack, E., & Keogh, J.G. (2020). Bitcoin, Blockchain and Fintech: A systematic review andcase studies in the supply chain. Production Planning & Control, 31(2-3), 115–142.

Wójcik, D & Ioannou, S. (2020). COVID-19 and Finance: Market developments so far and potential impacts on the financial sector and centre. TijdschriftvoorEconomischeenSocialeGeografie 111(3): 387–400.

Yamada, E., Shimizutani, S., & Murakami, E., (2020). “The COVID-19 pandemic, remittances and financial inclusion in the Philippines”, The Philippine Review of Economics, 57(1), 18-41.

Ziegler T, Zhang BZ, Carvajal A, Barton ME, Smit H, Wenzlaff K, Natarajan H, et al. (2020). Global COVID-19 FinTech market rapid assessment study - CCAF publications. University of Cambridge Alternative Finance Center. https://www.jbs.cam.ac.uk/faculty-research/centres/alternative-finance/publications/2020-global-covid-19-fintech-market-rapid-assessment-study/