Reaching Financial Inclusion: Necessary and Sufficient Conditions

Abstract

Financial inclusion is a vital development policy concern; different combinations and conditions of access to (supply) and use of (demand) financial services may predict levels of financial inclusion. With a fuzzy set qualitative comparative analysis, conducted across 61 countries worldwide, the current research establishes that financial literacy and human development are conditions of high financial inclusion; supply-side drivers, such as bank concentration and bank branches, represent substitutive conditions for attaining high levels of financial inclusion. With separate analyses of a split sample, designating developed and developing countries, the authors also determine that the absence of financial literacy and human development, as demand-side drivers, leads to diminished financial inclusion for both sets of countries. In turn, this research offers novel ideas for achieving more efficient policies to prompt financial inclusion.

Financial inclusion and business practices of microbusiness in Colombia

“…Financial inclusion, business practices, and personal initiative are three new concepts that have emerged in the extensive literature on entrepreneurship, development economics, and the psychology of organizations. Financial inclusion as a multidimensional notion refers to firms' usage of accounts with formal financial institutions that allows them to save and borrow money formally, request and obtain borrowing, have contract insurance, and use any type of payment service, including digital ones (e.g., Geraldes et al, 2022;Kabakova and Plaksenkov, 2018;Zins and Weill, 2016). The concept of business practices is the implementation by firms of a set of practices in the areas of marketing, record keeping, financial planning, and stock control (e.g., Anderson and McKenzie, 2022;McKenzie, 2021;McKenzie and Woodruff, 2017).…”

“…potential for increased welfare. Another more compelling definition is provided by Zins & Weill (2016), as cited in Geraldes et al (2022), who say, "when people maintain accounts with formal institutions that allow them to save and borrow money formally, contract insurance, or use payment service, they can be considered financially included" (p. 6). Financial inclusion has also been promoted as a means for MSMEs to enter into formalization (Cotler, 2017).…”

“…Stiglitz & Weiss (1981, 1992 showed that information asymmetries lead to either adverse selection or moral hazards between borrowers and lenders, which produce the access to credits and other financial services for some agents to be denied or reduced. Transaction costs lead to monetary costs and pecuniary barriers that prevent persons and firms from opening and keeping financial services (Geraldes et al, 2022). From the demand side, one of the main factors inhibiting people and firms from having access to financial services is their financial illiteracy.…”

“…Stiglitz and Weiss (1981) pioneered the literature on small businesses' access to financial services by highlighting that MSMEs often lack access to such services due to information asymmetries between credit providers and small business applicants. Recent literature has focused on small and medium-sized enterprises (Allen et al, 2016;Demirgüç-Kunt, 2013;Gabor & Brooks, 2017;Ouma et al, 2017;Zins & Weill, 2016;Wang & Guan, 2017), and focus on classic determinants of financial inclusion such as formality (Dabla-Norris & Koeda, 2008;De Mel et al, 2013;McKenzie & Sakho, 2010;Rodríguez Zamora, 2018), gender (Fowowe, 2017;Zins & Weill, 2016), education (Ahmad et al, 2020;Allen et al, 2016;Fungáčová & Weill, 2015;Ghosh & Vinod, 2017;McKenzie & Woodruff, 2017;Wang & Guan, 2017;Yan & Qi, 2021;Zins & Weill, 2016), among others (Geraldes et al, 2022;Salignac et al, 2016). Less is known about the specific case of microbusinesses, which face particular conditions compared with the other MSMEs (Prijadi et al, 2020).…”

Factors Influencing Saving Behaviour of Nigerians

“…While Akakpo, et al (2022), with a biprobit model on their data, conclude similarly for Ghana. About the same time also, Geraldes, Gama, & Augusto, (2022) analysed data from 61 countries worldwide and posit that financial literacy is a necessary condition for financial inclusion irrespective of the economic conditions of the countries. See also Morgan (2022) for observation in Asian countries.…”