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The impact of financial inclusion on economic development: the mediating roles of gross savings, social empowerment and economic empowerment

Rajib Chakraborty (Business Administration, Port City International University, Chittagong, Bangladesh)
Rebecca Abraham (Huizenga College of Business, Nova Southeastern University-Fort Lauderdale/Davie Campus, Fort Lauderdale, Florida, USA)

International Journal of Social Economics

ISSN: 0306-8293

Article publication date: 11 March 2021

Issue publication date: 31 May 2021

996

Abstract

Purpose

The purpose of this paper is to measure the impact of financial inclusion on economic development.

Design/methodology/approach

Study 1 used World Bank Data to develop financial inclusion percentages of ownership of checking accounts, savings accounts, debit cards and loans for 179 countries among the poorest 40% of the population, from 2011–2017. Regressions established the financial inclusion, gross savings and GDP per capita growth linkage. Study 2 created and validated scales to measure social empowerment, economic empowerment and economic development, among inhabitants of Bangladesh villages. Structural equation modeling measured the mediation by social empowerment and economic empowerment of the financial inclusion and economic development linkage.

Findings

Total financial inclusion was significantly explained by gross savings, which was significantly explained by GDP per capita growth. Ownership of a checking account significantly increased gross savings, while ownership of a savings account significantly increased GDP per capita growth. Ownership of a checking account differentiated countries with the highest 5% of gross savings, while ownership of a debit card significantly differentiated countries with the GDP per capita growth. Social empowerment and economic empowerment significantly mediated the financial inclusion and economic development relationship.

Originality/value

The study is unique in examining financial inclusion from a multi country, macroeconomic perspective combined with measurement of its theoretical underpinnings through a primary data-based sample extracted from respondents in Bangladesh, a lower middle-income country in Southeast Asia.

Keywords

Citation

Chakraborty, R. and Abraham, R. (2021), "The impact of financial inclusion on economic development: the mediating roles of gross savings, social empowerment and economic empowerment", International Journal of Social Economics, Vol. 48 No. 6, pp. 878-897. https://doi.org/10.1108/IJSE-02-2020-0077

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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