Financial Inclusion and Macroeconomic Stability in Emerging and Frontier Markets

Abstract

Financial inclusion, being considered as a key enabler to reducing poverty and boosting prosperity in emerging and frontier markets such as Vietnam, is the process in which individuals and small businesses are provided with an access to useful and affordable financial products and services. The extant literature on the empirical evidence regarding the contribution of financial inclusion to macroeconomic stability is mixed. This paper investigates the linkages between financial inclusion and macroeconomic stability, which has not yet been thoroughly examined in the literature, for 22 emerging and frontier economies from 2008 to 2015, with particular focus on a potential optimal level. Using the panel threshold estimation technique, the empirical findings show that financial inclusion, as approximated by the growth rate in the number of bank branches over 100,000 account holders, is found to enhance financial stability under a certain threshold. Financial inclusion is also found to be of benefit to maintaining stable inflation and output growth. Policy implications are also discussed on the basis of the important empirical findings.

Digital finance as a mechanism for extending the boundaries of financial inclusion in sub-Saharan Africa: A general methods of moments approach

“…induces a decline in financial inclusion, but in the long run, digital finance appears to have a positive determinant of financial inclusion for the selected SSA countries. This result agrees with the findings of Demombynes and Thegeya (2012), Honohan and King (2012), Jack and Suri (2014), Ozili (2018), Vo and McAleer (2019) which posit that digital financial inclusiveness has the capacity to reduce every barriers towards accessing cheap finance that will enable the poor create wealth, reduce poverty and inequality gap as well as provide employment for themselves and others. Likewise the International Finance Cooperation report for 2017 posit that through an array of digital finance services and products, large number of low income persons and micro-enterprises in rural communities have been included into mainstream finance culminating into job creation and poverty reduction (IFC, 2017).…”

“…Development finance literature is awash with studies establishing the link between financial innovation and real sector growth. Prominent among these studies are the works of Ozili (2018), Vo and McAleer (2019), and Ngongang (2015) which support that financial innovation is key to inclusive financial and real sector growth. Overtime, the financial sector in most African economies have transformed from just providing access to credit for the poor, to rural banking, community banking and more recently to micro financing, financial inclusion and wellness.…”

Financial Inclusion and Economic GROWTH: An International Evidence

“…Based on the constructed index of financial inclusion, another strand of empirical studies focuses on either analyzing the factors causing the level of financial inclusion at country levels (Chakravarty and Pal 2013;Fungacova and Weill 2014;Rojas-Suarez 2010;Sarma 2012;Wang and Guan 2017) or investigating the impact of financial inclusion on other macroeconomic variables (Ahamed and Mallick 2017;Chauvet and Jacolin 2017;Cihak et al 2016;Garcia and Jose 2016, Morgan and Pontines 2017, Vo et al 2019a), income inequality and economic growth (Kim, 2016;Kim, Yu and Hassan 2018;Park and Mercado 2015;Turegano and Herrero 2018) and even household levels (Lopez and Winkler 2017;Swamy 2014;Zhang and Posso 2017). Most of these studies have adopted the cross-section data for the analysis.…”

Preliminary findings on structural issues in the Vietnamese financial research landscape from 2008-2020

“…Financial inclusion, a measurement for accessibility of individuals or entrepreneurs to beneficial and affordable financial products or services (Vo et al, 2019), is researched for its practical policy implications in economic stabilization. The database is mostly collected from the emerging economies, which suggests inadequate financial access for such economies.…”