Financial Inclusion and Stability: Linkages Among Financial Development and Economic Growth

Purpose. More than half of the world’s adult population lacks access to credit, insurance, savings accounts, and other forms of formal financial services. Therefore, providing access to financial services for all has become a priority for national policymakers, multilateral institutions and other players in the development and innovation field. The aim of this paper is to answer the following questions: What are the key processes that lead to an inclusive financial system and what are the wider (longer term) impacts of improved financial inclusion on the lives of disadvantaged people, their quality of life and life chances. Approach. The questions are answered by adopting a multi-stage approach. The first stage involves ‘talking’ to ‘knowledgeable’ individuals of agencies/projects that deliver financial inclusion services and aims at getting a sense of the types of agencies that deliver financial inclusion, their experiences with promoting financial inclusion, and the (perceived) wider impact on service users. The second and third stages are central to this paper since they aim at capturing how people make use of financial inclusion services and the longer term impacts of improved financial inclusion on their life chances and quality of life. Findings. As economy is moving towards virtual currencies and digital innovations in finance, a bank account has become an essential tool in shaping an inclusive financial system, given its promise to reduce or eliminate the inefficiencies surrounding the conduct of specific types of financial transactions, and to increase financial inclusion. Moreover, access to banking is considered a basic necessity in most developed countries. Financial services and instruments play an important role in the process of domestic economic development. While some scholars have focused on the interaction of large or small enterprises, the most important consumers of financial products are the households due to their influence the scale and asset mix of finance. Value. The paper takes into consideration digital innovations in finance (or FinTech), which have, in recent years, attracted considerable attention from public authorities, financial sector stakeholders and academia, given their promise to reduce or eliminate the inefficiencies surrounding the conduct of specific types of financial transactions, and to increase financial inclusion.