Does financial inclusion enhance financial stability? Evidence from a developing economy

2021 ◽  
pp. 1-15
Author(s):  
Antony R. Atellu ◽  
Peter W. Muriu
Keyword(s):  
Financial Stability ◽  
Financial Inclusion ◽  
Developing Economy

FINANCIAL STABILITY AND FINANCIAL INCLUSION: THE CASE OF SME LENDING

2018 ◽  
Vol 63 (01) ◽  
pp. 111-124 ◽  
Author(s):  
PETER J. MORGAN ◽  
VICTOR PONTINES
Keyword(s):  
Low Income ◽  
Financial Services ◽  
Financial Stability ◽  
Developing Economies ◽  
Empirical Studies ◽  
Bank Lending ◽  
Financial Inclusion ◽  
Nonperforming Loans ◽  
Z Scores ◽  
Negative Impacts

Developing economies are seeking to promote financial inclusion, i.e., greater access to financial services for low-income households and firms. This raises the question of whether greater financial inclusion tends to increase or decrease financial stability. A number of studies have suggested both positive and negative impacts on financial stability, but very few empirical studies have been made. This study focuses on the implications of greater financial inclusion for small and medium-sized enterprises (SMEs) for financial stability. It estimates the effects of measures of the share of bank lending to SMEs on two measures of financial stability — bank nonperforming loans and bank Z scores. We find some evidence that an increased share of lending to SMEs aids financial stability by reducing non-performing loans (NPLs) and the probability of default by financial institutions.

scholarly journals Welfare Implications of Credit Rationing for Financial Consumers: An Empirical Investigation on the Case of the Korean Residential Mortgage Sector

2020 ◽  
Vol 5 (No. 1 Apr 2020) ◽  
pp. 13-24 ◽  
Author(s):  
Soojin Park ◽  
Man Cho
Keyword(s):  
Financial Stability ◽  
Choice Model ◽  
Credit Rationing ◽  
Borrowing Constraints ◽  
Mortgage Lending ◽  
Financial Inclusion ◽  
Policy Implications ◽  
Negative Effects ◽  
Household Level ◽  
Residential Mortgage

Credit rationing through borrowing constraints has long been an important research topic in the literature, in the context of managing financial risks (i.e., financial stability) as well as of expanding financial service to more marginal borrower segments (i.e., financial inclusion). This study empirically investigates the role of borrowing constraints in the residential mortgage lending sector in Korea, by utilizing a discrete tenure choice model to test the constraining effects of two particular lending restrictions on households’ home owning decisions - the wealth and income constraints as measured by the maximum loan-to-value (LTV) ratio and that of debt-to-income (DTI) ratio. Using the household-level micro data from Korea, we report that: the lending restrictions exhibit negative effects on the propensity to own; those constraining effects are also shown to increase for younger borrower cohorts; and, the magnitude of the effect of wealth constraint is larger than that of the income constraint, which is consistent with the findings from the prior studies. Using the empirical findings, we discuss policy implications of relevancy, in particular, as to how to balance between two often competing policy objectives - ensuring financial stability and extending financial inclusion - in the context of the residential mortgage lending sector in Korea.

scholarly journals Assessing the Role of Digital Finance on Shadow Economy and Financial Instability: An Empirical Analysis of Selected South Asian Countries

Mathematics ◽  
2021 ◽  
Vol 9 (23) ◽  
pp. 3018
Author(s):  
Aamir Aijaz Syed ◽  
Farhan Ahmed ◽  
Muhammad Abdul Kamal ◽  
Juan E. Trinidad Segovia
Keyword(s):  
Economic Growth ◽  
South Asian ◽  
Financial Stability ◽  
Shadow Economy ◽  
Emerging Countries ◽  
Financial Inclusion ◽  
Estimation Methods ◽  
Financial Instability ◽  
Systematic Risks

The advancement in fintech technological development in emerging countries has accelerated the role of digital finance in economic development. Digital finance assists in financial inclusion; however, it may also increase the chances of financial instability due to systematic risks. Emerging countries are also in the clutches of shadow economic growth, which reduces taxable income revenue and creates pressure on financial inclusion prospects. The current study attempts to measure the impact of digital finance on the shadow economic growth and financial stability among the selected South Asian emerging countries. We have used the CUP-FM and CUP-BC estimation methods to measure the above relationship on two model frameworks from 2004 to 2018, with the former measuring the influence of digital finance on the shadow economy and the latter examining the relationship between digital finance and financial stability. In addition, the second-generation unit root test, and the Westerlund cointegration analysis are also employed to confirm the stationarity and cointegration among the variables. The result of the Westerlund’s cointegration confirms a long cointegration between the explanatory and outcome variables. Furthermore, the long-run estimation results conclude that an increase in digital finance helps in reducing the growth of the shadow economy among the selected sample countries. However, it also increases the likelihood of systematic risks and increases financial instability. The study also reveals that the control variables like unemployment and industrial productivity also have a significant influence on financial stability and the shadow economy. The findings will assist readers in comprehending how digital finance influences the shadow economy and promotes financial inclusion and stability in emerging nations.

scholarly journals Impact of Financial inclusion and financial stability: Empirical and theoretical review

2021 ◽  
Vol 5 (1) ◽  
pp. 514-527
Author(s):  
Asghar Kamal ◽  
Talat Hussain ◽  
Muhammad Mahmood Shah Khan
Keyword(s):  
Financial Stability ◽  
Research Work ◽  
Negative Influence ◽  
Financial Inclusion ◽  
Efficient Management ◽  
Research Article ◽  
Relationship Of ◽  
The Impact ◽  
The Relationship ◽  
Research Studies

The foremost objective of the recent research work is to review the connection among the financial inclusion (FI) and banks financial stability (FS). The research article survey a vest body of literature devoted to evaluating the relationship of among the FI and FS of the banks. The literature review evaluates recent empirical research studies on the impact of FS and banks FS. The research works divided into following part (i) What is financial inclusion (FI) (ii) What is stability (FS) (iii) the influence of FI and FS (iv) FI measurement and indicator (v) whether FI lead to enhance the FS. This paper present the relevant review of imperialistic research on the nexus among the influence of FI on FS since the period of 1995-2020. Abundant research studies to date suggest that FI has positive and significant impact on FS of the banks.  While few other research study also reveals that when FI have negative influence on the FS is due to the without having efficient management when the credit is expanded in this time it will increase the risk for financial stability.

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