Does financial inclusion affect financial stability: Evidence from BRICS nations?

Barik, Rajesh; Pradhan, Ashis Kumar

doi:10.1353/jda.2021.0023

Cited by 20 publications

(25 citation statements)

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“…Over time, authors have examined the connection between financial inclusion and poverty from cross-country or country-specific perspectives, using different measures of financial inclusion and estimation approaches. For instance, certain researchers have investigated the influence of financial inclusion on poverty (and income inequality) in cross-country studies, focusing on a group of developing countries in Asia, Latin America, SSA, and Europe (Abiona & Koppensteiner, 2022;Aracil et al, 2022;Bakari et al, 2019;Barik & Pradhan, 2021;Coulibali & Yogo, 2016;Cyn-Young & Rogelio, 2015Demir et al, 2022;Dogan et al, 2022;Fadum, 2014;Jabir, 2015;Omar & Inaba, 2020;Polloni-Silva et al, 2021). These studies confirmed that financial inclusion lowers poverty level.…”

Section: Review Of Empirical Literature On Financial Inclusion and Po...mentioning

confidence: 82%

Does Financial Inclusion Reduce Poverty in Niger State? Evidence from Logistic Regression Technique

Abu¹,

Sakanko

David

et al. 2022

OMEE

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This study employs the logistic regression method to examine the effect of financial inclusion on the level of poverty in Niger State of Nigeria based on cross-sectional data randomly collected from 624 respondents across 224 towns and villages in 12 local government areas (LGAs) of the state. The estimation results illustrate that financial inclusion (proxied by bank account ownership, including access to bank, credit, and mobile phone) is significantly and negatively related to the level of poverty. This empirical outcome is further validated by the results of the Probit regression technique which show a significant negative relationship between financial inclusion and poverty in the state. Based on these empirical findings, the study recommends policies which include broadening bank coverage, softening credit requirements, and enhancement of people’s access to mobile phone and internet services in rural areas of Niger state.

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Section: Review Of Empirical Literature On Financial Inclusion and Po...mentioning

confidence: 82%

Does Financial Inclusion Reduce Poverty in Niger State? Evidence from Logistic Regression Technique

Abu¹,

Sakanko

David

et al. 2022

OMEE

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“…Here, Z-score implies the banks Z-score, and lnZ-score represents log of Z-score, which is used for the proxy for financial stability. This is similar of the method of some previous studies (Barik and Pradhan, 2021;Dienillah et al, 2016;Morgan and Pontines, 2014). FII represents a multidimensional FII, and X represents a set of control variables.…”

Section: Econometric Model Specificationmentioning

confidence: 87%

“…According to Khan (2011), financial inclusion has three negative impacts on financial stability. First , mass participation of low-income people in the formal financial sector may increase the transaction and information costs; further, it increases the financial system’s inefficiencies (Jose and Garcia, 2016; Sahay et al , 2015; Beck and De Jonghe, 2013; Barik and Pradhan, 2021). Second, to serve small and medium borrowers, the bank might face its reputational risk by outsourcing various activities such as credit evaluation.…”

Section: Review Of Literature: Theoretical and Empiricalmentioning

confidence: 99%

“…Furthermore, Dienillah et al (2018) showed that financial inclusion influences financial stability as measured by bank z-score in Asian nations. Using the principal component analysis method for the calculation of FII and other methods like Dumitrescue and Hurlin causality test and generalized method of moments method, Barik and Pradhan (2021) investigated the linkages between financial inclusion and financial stability in Brazil, Russia, India, China and South Africa countries from 2005 to 2015. Their study results indicated that financial inclusion has a negative and significant impact on financial stability.…”

Section: Review Of Literature: Theoretical and Empiricalmentioning

confidence: 99%

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Financial inclusion and financial stability nexus revisited in South Asian countries: evidence from a new multidimensional financial inclusion index

Sethy

Goyari

2022

JFEP

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Purpose The main purpose of this paper is to examine the relationship between financial inclusion and financial stability in South Asian countries. Design/methodology/approach To measure the financial inclusion, a multidimensional time-varying index is constructed following the Human Development Index method. The long-run relationship between financial inclusion and financial stability is examined by using the panel cointegration test, fully modified ordinary least squares and dynamic ordinary least squares approaches to show the long-run elasticity of explanatory variables on dependent variables. Further, Dumitrescu-Hurlin panel causality test is used to find the direction of causality between financial inclusion and financial stability. Data set is of annual frequency of seven countries for the period from 2004 to 2018. Findings The empirical findings of this study confirm that financial inclusion has a positive and statistically significant impact on financial stability. These results suggest that South Asian countries can attain long-run financial stability by improving the coverage of financial inclusion. Further, panel causality test shows a unidirectional causality from financial inclusion to financial stability. Research limitations/implications The major limitation of the study is the availability of time series data for all important variables. Various socioeconomic variables can be used to measure financial stability, but this study included only the Z-score as the proxy for financial stability. Due to the data constraint, this study is unable to use the time series econometric analysis. Practical implications As the study confirms that financial inclusion is one of the main drivers of financial stability, it is suggested that the policymakers should emphasize on financial sector reforms to enjoy financial stability in the long run, especially in developing countries. So governments and policymakers of study countries need to address the issues involved in access to financial services to increase financial stability. Furthermore, it is also important to remove limitations of access to formal financial services for marginalized sections of the society with proper supervisions. Originality/value This is a new contribution on the present topic. This study has constructed a new multidimensional financial inclusion index (FII) following the Human Development Index method for South Asian countries based on annual data and using ten indicators of formal financial services related to availability, accessibility and usage. To the best of the authors’ knowledge and information, this is the first study on South Asian countries to construct and apply the new multidimensional FII. Further, the study examines the long-run elasticity of financial inclusion on financial stability employing FMOLS and DOLS approach.

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“…In many developing and emerging economy, it is argued that the mere development of the financial system is not enough for the country to reduce poverty because the financial system does not reach all sections of people equally due to the problem of adverse selection or asymmetry information in the financial market and high fixed cost/risk associated in lending to small borrowers. Sometimes the financial system is more favoured towards the better-off person, elite people, or urban middle-class section leaving the poor and marginalized people out of the reach of the formal financial system (Achugamonu, et al 2020; Barik and Pradhan, 2021). In this situation, the concept of financial inclusion plays a very crucial role to bring the unbanked/underbanked people under the banking purview with an easy and affordable cost .…”

Section: Review Of Literaturementioning

confidence: 99%

What Role Does Financial Inclusion Play for Poverty Reduction? Empirical Evidence From The Indian States in the Post-Liberalization Era

Barik

Lenka

2021

Preprint

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The paper tries to analyzes the effect of financial inclusion on poverty reduction among 28 Indian states and rural-urban as well. Using data from 28 Indian states over the period of 1993 to 2015, this study constructed a single financial inclusion index through Principal Component Analysis (PCA) method, which signifies the state-wise variation in financial inclusion services. Furthermore, this study uses Fixed Effect, Random Effect, Panel Corrected Standard Errors, Feasible General Least Square, and Hausman-Taylor Regression model to know the impact of financial inclusion on state-wise poverty reduction and rural-urban poverty reduction as well. The results of this study suggest that financial inclusion has a negative and significant effect on state-wise and rural-urban poverty reduction respectively. With regards to the control variables, this study finds that variables like social sector expenditure, per capita state GDP and capital receipt are negatively associated with all three categories of poverty (i.e., overall poverty and rural-urban poverty) whereas the rural population is positively associated.

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Does financial inclusion affect financial stability: Evidence from BRICS nations?

Cited by 20 publications

References 0 publications

Does Financial Inclusion Reduce Poverty in Niger State? Evidence from Logistic Regression Technique

Does Financial Inclusion Reduce Poverty in Niger State? Evidence from Logistic Regression Technique

Financial inclusion and financial stability nexus revisited in South Asian countries: evidence from a new multidimensional financial inclusion index

What Role Does Financial Inclusion Play for Poverty Reduction? Empirical Evidence From The Indian States in the Post-Liberalization Era

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