Article Sidebar

Submitted
June 30, 2023
Accepted
October 22, 2023
Published
October 31, 2023
Download
Full Text PDF
Statistic
Read Counter : 1281 Download : 1332

Downloads

Download data is not yet available.

Main Article Content

Abstract

Purpose ― The main objective of this study is to develop a comprehensive digital financial inclusion index (CDFII) that accounts for technology-driven financial inclusion and to compare it with a traditional financial inclusion index (TFII) to enhance the measurement of fintech-driven financial inclusion across countries.
Methods ― The study employs a three-stage principal component analysis (PCA) to construct the CDFII and TFII using the latest available data from 31 developing countries during the period 2015-2021. The CDFII incorporates a new sub-index measuring individual literacy levels for using financial services, along with existing sub-indices capturing the penetration, availability, and usage of DFS. By integrating digital financial inclusion (DFII) and TFII, the overall CDFII is estimated.
Findings ― The findings reveal that the levels of DFII and CDFII are higher than TFII for most of the economies examined. This indicates the significant impact of technology-driven financial inclusion in expanding access to formal banking and non-banking financial services for previously unbanked populations.
Implication ― The study implies that policymakers and researchers should prioritize the integration of technology-driven financial inclusion indicators, such as the comprehensive digital financial inclusion index (CDFII), into their assessments and interventions to ensure a more accurate and effective approach to promoting inclusive and sustainable economic development.
Originality ― This study introduces the CDFII as a novel comprehensive index that addresses the shortcomings of traditional financial inclusion indices. By incorporating individual skill levels and considering dimensions specific to DFS, the CDFII provides a more accurate representation of fintech-driven financial inclusion levels. This contributes to the existing literature on financial inclusion measurement and provides a valuable analytical tool for researchers and policymakers.

Keywords

Financial Inclusion Fintech Digital Financial Services Comprehensive Digital Financial Inclusion Index

Article Details

License

Copyright (c) 2023 Banna Banik, Chandan Kumar Roy

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Authors who publish with this journal agree to the following terms:

  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-ShareAlike 4.0 International License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
  3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).

Creative Commons License

Economic Journal of Emerging Markets by Center for Economic Studies, Universitas Islam Indonesia is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

How to Cite
Banik, B., & Roy, C. K. (2023). Measuring fintech-driven financial inclusion for developing countries: Comprehensive Digital Financial Inclusion Index (CDFII). Economic Journal of Emerging Markets, 15(2), 143–159. https://doi.org/10.20885/ejem.vol15.iss2.art3
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX

References

  1. Ahamed, M. M., & Mallick, S. K. (2019). Is financial inclusion good for bank stability? International evidence. Journal of Economic Behavior & Organization, 157, 403–427. https://doi.org/https://doi.org/10.1016/j.jebo.2017.07.027
  2. Amidžić, G., Massara, A., & Mialou, A. (2014). Assessing countries’ financial inclusion standing: A new composite index. IMF Working Papers, 14(36), 1. https://doi.org/10.5089/9781475569681.001
  3. World Bank. (2018). Financial inclusion. https://www.worldbank.org/en/topic/financialinclusion/overview#1
  4. Beck, T., Demirguc-Kunt, A., & Martinez Peria, M. S. (2007). Reaching out: Access to and use of banking services across countries. Journal of Financial Economics, 85(1), 234–266. https://doi.org/10.1016/j.jfineco.2006.07.002
  5. Blancher, N., Appendino, M., Bibolov, A., Fouejieu, A., Li, J., Ndoye, A., Panagiotakopoulou, A., Shi, W., & Sydorenko, T. (2019). Financial inclusion of small and medium-sized enterprises in the Middle East and Central Asia (19/02; IMF Departmental Papers, Vol. 19). https://doi.org/10.5089/9781484383124.087
  6. Cámara, N., Research, B., & Tuesta, D. (2017). Measuring financial inclusion: A multidimensional index (14/26; BBVA Bank Working Paper, Issue September).
  7. Cámara, N., & Tuesta, D. A. (2014). Measuring financial inclusion: A muldimensional index (14/26; BBVA Research Paper). https://doi.org/10.2139/ssrn.2634616
  8. Dabla-Norris, E., Deng, Y., Ivanova, A., Karpowicz, I., Unsal, D. F., VanLeemput, E., & Wong, J. (2015). Financial Inclusion: Zooming in on Latin America (WP/15/206; IMF Working Papers). https://doi.org/10.5089/9781513568928.001
  9. Davidovic, S., Loukoianova, E., Sullivan, C., & Tourpe, H. (2019). Strategy for fintech applications in the Pacific Island countries (19/14; IMF Departmental Papers). https://doi.org/10.5089/9781498326735.087
  10. de Koker, L., & Jentzsch, N. (2013). Financial inclusion and financial integrity: Aligned incentives? World Development, 44, 267–280. https://doi.org/10.1016/j.worlddev.2012.11.002
  11. Demirguc-Kunt, A., & Klapper, L. (2012). Measuring financial inclusion: The global index database. In Policy Research Working Papers. The World Bank. https://doi.org/10.1596/1813-9450-6025
  12. Gupte, R., Venkataramani, B., & Gupta, D. (2012). Computation of financial inclusion index for India. Procedia - Social and Behavioral Sciences, 37, 133–149. https://doi.org/10.1016/j.sbspro.2012.03.281
  13. Honohan, P. (2008). Cross-country variation in household access to financial services. Journal of Banking & Finance, 32(11), 2493–2500. https://doi.org/10.1016/j.jbankfin.2008.05.004
  14. Kaiser, H. F. (1960). The application of electronic computers to factor analysis. Educational and Psychological Measurement, 20(1), 141–151. https://doi.org/10.1177/001316446002000116
  15. Lenka, S. K., & Barik, R. (2018). Has expansion of mobile phone and internet use spurred financial inclusion in the SAARC countries? Financial Innovation, 4(1), 5. https://doi.org/10.1186/s40854-018-0089-x
  16. Loukoianova, E., Yang, Y., Guo, S., Hunter, L., Jahan, S., Jamaludin, F., & Schauer, J. (2018). Financial inclusion in Asia-Pacific (18/17; IMF Departmental Paper). https://doi.org/10.5089/9781484371015.087
  17. Lukonga, I. (2018). Fintech, inclusive growth and cyber risks: Focus on the MENAP and CCA regions (18/201; IMF Working Paper).
  18. Manyika, J., Lund, S., Singer, M., White, O., & Berry, C. (2016). Digital finance for all: Powering inclusive growth in emerging economies (pp. 1–15). McKinsey Global Institute. www.mckinsey.com/mgi.%0Awww.mckinsey.com/mgi.%0Ahttps://www.mckinsey.com/~/media/McKinsey/Featured Insights/Employment and Growth/How digital finance could boost growth in emerging economies/MGI-Digital-Finance-For-All-Executive-summary-September-2016.ash
  19. Mialou, A., Amidzic, G., & Massara, A. (2017). Assessing countries’ financial inclusion standing–A new composite index. Journal of Banking and Financial Economics, 2(8), 105–126.
  20. Park, C.-Y., & Mercado, R. V. Jr. (2018). Financial inclusion: New measurement and cross-country impact assessment (539; ADB Economics Working Paper Series).
  21. Park, C.-Y., & Mercado, R. V. Jr. (2015). Financial inclusion, poverty, and income inequality in developing Asia (426; ADB Economics Working Paper Series).
  22. Pazarbasioglu, C., Mora, A. G., Uttamchandani, M., Natarajan, H., Feyen, E., & Saal, M. (2020). Digital financial services. World Bank Group. https://doi.org/10.7551/mitpress/13673.003.0008
  23. Sahay, R., Allmen, U. E. von, Lahreche, A., Khera, P., Ogawa, S., Bazarbash, M., & Beaton, K. (2020). The promise of fintech: Financial inclusion in the post COVID-19 era. In from International Monetary Fund (20/09; IMF Departmental Papers).
  24. Sahay, R., Čihák, M., Barajas, A., Bi, R., Ayala, D., Gao, Y., Kyobe, A., Nguyen, L., Saborowski, C., Svirydzenka, K., Reza Yousefi, S., Ratna Sahay, B., Bredenkamp, H., Ross Levine, P., Arregui, N., Blancher, N., Brandao-Marques, L., Dell, G., Eugster, J., … Sommer, M. (2015). Rethinking financial deepening: Stability and growth in emerging markets (15/08; IMF Staff Discussion Note).
  25. Sarma, M. (2012). Index of financial inclusion–a measure of financial sector inclusiveness (07/2012; Berlin Working Papers on Money, Finance, Trade and Development).
  26. Sarma, M., & Pais, J. (2008). Financial inclusion and development: A cross country analysis. Annual Conference of the Human Development and Capability Association, 10–13. https://doi.org/10.1002/jid
  27. Shaikh, A. A., Glavee-Geo, R., Karjaluoto, H., & Hinson, R. E. (2023). Mobile money as a driver of digital financial inclusion. Technological Forecasting and Social Change, 186, 122158. https://doi.org/10.1016/j.techfore.2022.122158
  28. Sy, A. N., Maino, R., Massara, A., Perez-Saiz, H., & Sharma, P. (2019). Fintech in Sub-Saharan African countries: A game changer? (19/04; IMF Departmental Paper).
  29. Tarazi, M., & Breloff, P. (2010). Nonbank e-money issuers: Regulatory approaches to protecting customer funds. http://www.cgap.org/sites/default/files/CGAP-Focus-Note-Nonbank-E-Money-Issuers-Regulatory-Approaches-to-Protecting-Customer-Funds-Jul-2010.pdf
  30. Tay, L.-Y., Tai, H.-T., & Tan, G.-S. (2022). Digital financial inclusion: A gateway to sustainable development. Heliyon, 8(6), e09766. https://doi.org/10.1016/j.heliyon.2022.e09766
  31. Urhie, E., Amonu, O. C., Mbah, C., Ewetan, O. O., Matthew, O. A., Adediran, O., Adesanya, O., & Adekeye, A. (2021). Banking technology and cashless economy in selected Sub-Saharan African countries: Does education matter? Journal of Money Laundering Control, 24(3), 584–595. https://doi.org/10.1108/JMLC-10-2020-0122
  32. World Bank. (2013). Global financial development report: Rethinking the role of the state in finance. https://openknowledge.worldbank.org/handle/10986/11848
No Related Submission Found