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This paper aims to investigate the association between financial inclusion and sustainable development in a global context.
Abstract
Purpose
This paper aims to investigate the association between financial inclusion and sustainable development in a global context.
Design/methodology/approach
The study used two datasets, and employed the Pearson correlation analysis and granger causality test to examine the correlation and pairwise causality between financial inclusion and sustainable development.
Findings
High levels of financial inclusion (in terms of higher commercial bank branches per 100,000 adults) is significantly associated with higher electricity production from renewable sources, higher industry productivity, higher adult literacy rate and higher renewable electricity output. Also, higher financial inclusion is significantly associated with low combustible renewables and waste. There is a uni-directional granger causality between global interest in internet information about sustainable development and global interest in internet information about financial inclusion, particularly in the period after the global financial crisis but before the COVID-19 pandemic.
Practical implications
The correlation between financial inclusion and sustainable development depends on the indicators employed to measure financial inclusion and sustainable development. The results support global calls for greater financial inclusion and the speedy attainment of the sustainable development goals for the good of all people, the environment and for the planet.
Originality/value
This paper is the first study in the literature to analyze the link between financial inclusion and sustainable development using global data. This study contributes to the existing literature by investigating the association between financial inclusion and sustainable development in a global context.
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Daniel Agyapong and Kojo Asare Bedjabeng
The purpose of this paper is to examine the role external debt and foreign direct investment play in influencing financial development in Africa.
Abstract
Purpose
The purpose of this paper is to examine the role external debt and foreign direct investment play in influencing financial development in Africa.
Design/methodology/approach
Annual data on external debt, foreign direct investment and financial development were extracted from the World Bank World Development Indicators from 2002 to 2015. The data employed were analysed within causal research design and the dynamic panel using generalized method of moment estimation approach.
Findings
The findings revealed that external debt and foreign direct investment have a significant positive relationship with financial development in African economies. Governments of the sampled economies should enact policies that would help attract high level of foreign direct investment as it contributes positively to financial development. Finally, governments of the sampled African economies should ensure foreign direct investment and external funds borrowed are channelled to productive sectors.
Originality/value
The paper analysed the relationship between external debt, FDI inflows and financial sector development. The paper is the first in terms of such analysis within the framework of the dual-gap framework, which is the first time in these kinds of studies. Previous studies have concentrated on the effect of financial sector on FDI and not the other way around.
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Rexford Abaidoo and Elvis Kwame Agyapong
This study examines how institutional quality influences variability in financial development among economies in Sub-Saharan Africa (SSA).
Abstract
Purpose
This study examines how institutional quality influences variability in financial development among economies in Sub-Saharan Africa (SSA).
Design/methodology/approach
Empirical estimations verifying various relationships are performed using the limited information maximum likelihood (LIML) estimation technique.
Findings
The results suggest that institutional quality enhances the pace of financial development among economies in the sub-region all things being equal. In a further micro-level analysis where components of institutional quality index are examined separately, the study’s results suggest that effective governance, regulatory quality, rule of law and accountability tend to have a significant positive impact on financial sector development.
Research limitations/implications
Findings of the study suggest that policies geared towards improving governance and regulatory institutions can augment development of the financial sector among economies in SSA; governments and policymakers are therefore encouraged to resource noted institutions to play effective roles for the development of the financial sector.
Originality/value
Compared to related studies, this study reorients existing paradigm, which emphasizes the role of governance and institutional variables in the economic growth discourse. The authors’ empirical inquiry rather focuses on how governance and institutional structures influence regional financial development dynamics. Specifically, this study differs from most macro-level studies found in literature because it examines the impact of hitherto unexamined governance and institutional variables on financial development among economies in SSA.
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Elvis Achuo, Pilag Kakeu and Simplice Asongu
Despite the global resolves to curtail fossil fuel consumption (FFC) in favour of clean energies, several countries continue to rely on carbon-intensive sources in meeting their…
Abstract
Purpose
Despite the global resolves to curtail fossil fuel consumption (FFC) in favour of clean energies, several countries continue to rely on carbon-intensive sources in meeting their energy demands. Financial constraints and limited knowledge with regards to green energy sources constitute major setbacks to the energy transition process. This study therefore aims to examine the effects of financial development and human capital on energy consumption.
Design/methodology/approach
The empirical analysis is based on the system generalised method of moments (SGMM) for a panel of 134 countries from 1996 to 2019. The SGMM estimates conducted on the basis of three measures of energy consumption, notably fossil fuel, renewable energy as well as total energy consumption (TEC), provide divergent results.
Findings
While financial development significantly reduces FFC, its effect is positive though non-significant with regards to renewable energy consumption. Conversely, financial development has a positive and significant effect on TEC. Moreover, the results reveal that human capital development has an enhancing though non-significant effect on the energy transition process. In addition, the results reveal that resource rents have an enhancing effect on the energy transition process. However, when natural resources rents are disaggregated into various components (oil, coal, mineral, natural gas and forest rents), the effects on energy transition are divergent. Although our findings are consistent when the global panel is split into developed and developing economies, the results are divergent across geographical regions. Contingent on these findings, actionable policy implications are discussed.
Originality/value
The study complements extant literature by assessing nexuses between financial development, human capital and energy transition from a global perspective.
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Anushka Verma, Prajakta Sandeep Dandgawhal and Arun Kumar Giri
The present study aimed to examine the relationship between information and communication technologies (ICT) diffusion, financial development and economic growth in the panel of…
Abstract
Purpose
The present study aimed to examine the relationship between information and communication technologies (ICT) diffusion, financial development and economic growth in the panel of developing countries for 2005–2019.
Design/methodology/approach
The study employed the principal component analysis (PCA) to extract the index of ICT diffusion. First-generation panel unit root tests such as Levine Lin Chu (LLC), Im Pesaran Shin (IPS), Augmented Dickey-Fuller (ADF) and Phillips and Perron (PP) were employed to check the stationarity of the variables. Pedroni and Kao co-integration techniques were used to examine the existence of the long-run relationship, and co-integration coefficients were estimated using FMOLS and dynamic ordinary least squares (DOLS). The panel Granger causality approach examined the short-run and long-run causality.
Findings
The results confirmed that ICT diffusion, financial development and trade openness accelerate growth, whereas inflation dampens economic growth. Further, the causality test showed bidirectional causality between ICT growth and financial development growth but a unidirectional causality from financial development to ICT diffusion in developing countries.
Originality/value
The study recommends synchronizing public and private sector investment for a synergistic effect on ICT infrastructure and adequate investment in the financial sector to increase the growth rate in developing countries. Economic policies should be adopted toward incentives and subsidies to ensure affordable ICT services for disadvantaged communities. Also, training programs focussing on enhancing digital literacy to enable all segments of the population to use digital platforms for financial services are recommended.
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This study examined the roles of public spending and population moderating characteristic structure of selected African economies on bank-based financial development through…
Abstract
Purpose
This study examined the roles of public spending and population moderating characteristic structure of selected African economies on bank-based financial development through credit to private sector.
Design/methodology/approach
The study sampled 37 selected African economies for the years 1991–2018, and it applied a pooled mean group (PMG) estimator to account for short-run and long-run causal effects, and confirmed short-run adjustments towards the long-run convergences between the variables. Specific suitable tests were also applied.
Findings
Evidence confirms positive impacts of both capital formation and final consumption expenditures on financial development in the short run and long run. The moderation of population structures on expenditure structures help to speed up convergences.
Originality/value
This work attests its innovation by accounting for the separate effects of the expenditure types, the moderation effects of young and mature populations for capital and final consumption expenditure on financial development among selected economies in Africa.
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Radwa Ahmed Abdelghaffar, Hebatalla Atef Emam and Nagwa Abdallah Samak
The purpose of this study is to investigate the nexus between financial inclusion and human development for countries belonging to different income groups during 2009–2019, and…
Abstract
Purpose
The purpose of this study is to investigate the nexus between financial inclusion and human development for countries belonging to different income groups during 2009–2019, and whether this relation differs across these groups.
Design/methodology/approach
The paper constructs an index of financial inclusion (IFI) for different income group countries employing dynamic panel data models estimated by generalized method of moments (GMM) to analyse the relation between financial inclusion and human development.
Findings
Financial inclusion in low and lower-middle-income countries has higher effect on human development than in high and upper-middle income countries.
Research limitations/implications
The study examines the effect of IFI on the human development index (HDI) at the aggregate level. Future research can tackle the IFI effect on every component of HDI and other aspects of financial inclusion could be incorporated like financial technology.
Originality/value
The originality lies in constructing an index for financial inclusion using the most recent data for a wide range of countries, in addition to examining the impact of financial inclusion on the human development levels of different income groups allowing for more accurate analysis tackling the differences in terms of adopted policies across various income groups; unlike other studies that are carried out on a one country basis or only across one or two country groups that do not allow for comparison across various groups of countries.
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Biplab Kumar Guru and Inder Sekhar Yadav
The purpose of this paper is to examine the relationship between financial development and economic growth for five major emerging economies: Brazil, Russia, India, China and…
Abstract
Purpose
The purpose of this paper is to examine the relationship between financial development and economic growth for five major emerging economies: Brazil, Russia, India, China and South (BRICS) during 1993 to 2014 using banking sector and stock market development indicators.
Design/methodology/approach
To begin with, the study first examined some of the principal indicators of financial development and macroeconomic variables of the selected economies. Next, using generalized method of moment system estimation (SYS-GMM), the relationship between financial development and growth is investigated. The banking sector development indicators used in the study include size of the financial intermediaries, credit to deposit ratio (CDR) and domestic credit to private sector (CPS), whereas the stock market development indicators are value of shares traded and turnover ratio. Also, some macroeconomic control variables such as inflation, exports and the enrolment in secondary education were used.
Findings
The examination of the principal indicators of financial development and macroeconomic variables have shown considerable differences between the selected economies. Results from the dynamic one-step SYS-GMM estimates confirm that in presence of turnover ratio, all the selected banking development indicators such as size of financial intermediaries, CDR and CPS are positively significantly determining economic growth. Similarly, in presence of all the selected banking sector development indicators, value of shares traded is found to be positively significantly associated with economic growth. However, the same is not true when turnover ratio is regressed in presence of banking sector variables. Overall, the evidence suggests that banking sector development and stock market development indicators are complementary to each other in stimulating economic growth.
Practical implications
A positive association between financial development and growth indicates that the policymakers should take necessary measures toward simultaneous development of both banking sector as well as stock market for inducing growth.
Originality/value
The present paper attempts to examine the relationship between financial development and growth using both banking sector and stock market development indicators which has not been attempted before for BRICS. Also, most of the existing studies are found in case of developed economies. This paper tries to fill this void by studying five major emerging economies.
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Mahmoud Mohieldin, Khaled Hussein and Ahmed Rostom
This paper aims to discuss the evolution of the Egyptian banking sector and the main trends in financial development in Egypt. The purpose of this study is to examine empirically…
Abstract
Purpose
This paper aims to discuss the evolution of the Egyptian banking sector and the main trends in financial development in Egypt. The purpose of this study is to examine empirically the relationship between the development of the financial sector and economic growth in Egypt between 1980 and 2016.
Design/methodology/approach
The paper draws comparisons based on critical financial indicators between Egypt and selected emerging markets and developing economies. It uses a new data set of financial development indexes released by the International Monetary Fund. This paper uses econometric time series modelling of bivariate regressions for real growth per capita and measures of financial development to assess the relationship between financial development and economic growth in Egypt.
Findings
There are three specific findings based on the empirical analysis. First, there is a strong association between real growth per capita and financial development measured by money supply to GDP. Second, access to and the efficiency of banking services are not associated with real per capita income. Third, the Financial Markets Access Index – which compiles data on market capitalization outside of the top ten largest companies and the number of corporate issuers of debt – indicates a robust association with real per capita GDP.
Originality/value
The paper uses advanced empirical investigation techniques and new data sets available to assess the critical relationship between finance and growth in Egypt. The main policy implications of the empirical results of this paper suggest a stronger focus on promoting a more proactive role for the financial services industry in Egypt. In particular, there is a critical role for bank financing to support the private sector to maintain an inclusive growth momentum. Further development of the capital market will promote sustainability of such economic growth.
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Rabia Khatun and Jagadish Prasad Bist
The purpose of this paper is to examine the relationship between financial development, openness in financial services trade and economic growth in BRICS countries for the period…
Abstract
Purpose
The purpose of this paper is to examine the relationship between financial development, openness in financial services trade and economic growth in BRICS countries for the period 1990–2012.
Design/methodology/approach
An index for financial development has been constructed using principal component analysis technique by including banking sector development, stock market development, bond market development and insurance sector development. For the robustness of the result, the long-run cointegrating relationship amongst the variables has been analyzed.
Findings
Overall financial development has a positive and significant impact on economic growth. To take the full advantage of openness in financial services trade, countries need to put more emphasis on the development of their stock markets, bond markets and the insurance sector. The result shows that openness in financial services trade has a positive impact on economic growth when the stock market, bond market and insurance sector are included in the system.
Research limitations/implications
The policy implication of the findings is that policymakers should focus more on developing all four areas of finance to get the full benefit of the financial system on the process of economic growth.
Originality/value
The authors have constructed the better indicators of financial development in the case of BRICS economies. Most of the studies in BRICS economies have measured the development of the financial sector as either banking sector development or stock market development. However, the present study includes all four areas of finance (banking sector development, stock market development, insurance sector development and bond market development) into account.
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