An Overview of FinTech in Bangladesh

How the future financial industry is going to be reshaped by technological innovations is now a concern. Financial technology (FinTech), a much-discussed topic around the globe, is changing the overall financial system. The trend is not an exception in developing countries like Bangladesh. In this chapter, the authors aim to explore the current state of FinTech in Bangladesh in light with the possible challenges for growth, opportunities, and future prospects. The growth of FinTech helps a large percentage of people to become banked or has given possible access to formal finance. For having access to finance, high rate of mobile phone penetration, smooth mobile internet access, and high cost of access to formal finance are some factors that have enhanced FinTech penetration in Bangladesh for the past few years. In line with the given prospects, there are problems too. Therefore, using an in-depth study, this research addresses those issues, provides recommendations, and looks for possible solutions for the smooth operation of FinTech in Bangladesh.

Formal and Informal Institutions: The Independent and Joint Impacts on Firm Innovation

ABSTRACT We study the impact of formal and informal institutions perceived and experienced by firms on their innovation using the 2012 World Bank Enterprise Survey data in China. We propose a framework to identify different innovator types of firms. Our analysis shows that (1) perceived constraints from the governmental system make firms more likely to be innovators than non-innovators; (2) perceived constraints from the legal system make firms more likely to be imitators than innovators; (3) lack of formal finance makes firms more likely to be non-innovators than innovators; (4) prevalence of bribery makes firms more likely to be non-innovators than innovators but less likely to be innovation pretenders than innovators. Our study enriches institutional theory and innovation research by establishing a framework that encompasses multiple dimensions of formal and informal institutions perceived and experienced by firms and the impacts of such perception and experience on firms’ propensity to become certain type of innovator.

When does informal finance help exports of emerging market firms? A contingent perspective

Purpose The purpose of this study is to examine whether the usage of informal finance helps exports of emerging market firms. Design/methodology/approach The study analyzes a large dataset of observations on emerging market firms. To address the issue of a non-random sample and correct for self-selection in the regression analyzes, this paper uses the two-stage Heckman procedure. In the first stage, this study uses a sample of 74,148 firms from 135 countries over an 11-year time period (2006 to 2016). In the second stage, which includes only firms involved in exports, the analyses are based on 13,608 observations on firms from 135 countries over the same time period. Findings The study finds that the usage of informal finance helps exports of emerging market firms. Furthermore, the interactive effect between informal finance and home country affluence also influences exports. Research limitations/implications The analyses do not account for destination market characteristics such as size and growth. Practical implications The study suggests that emerging market firms should not shy away from using informal finance which can often be more convenient, and sometimes cheaper, than formal finance. Informal finance’s timeliness might be particularly useful for pursuing strategies such as exporting. Originality/value Studies in international business implicitly assume that finance is available for pursuing strategies such as exports or foreign direct investment. However, formal finance is scarce in emerging markets. By drawing a linkage between informal finance and exports in emerging markets, the study adds to the international business literature. The study also examines joint and interactive effects of home country characteristics and deployment of informal finance on exporting.

The Role of Formal and Informal Finance in Economic Development

There is an apparent assumption amongst policymakers despite evidence of heavy and increasing reliance on informal finance, the co-existence of formal and informal financial markets, and linkages between informal finance and economic outcomes that, formal rather than informal finance, is needed for economic development. The objective of this study is to examine the role of formal and informal finance in Economic Development. We use White Heteroscedasticity Adjusted and Two-Stage Least Squares Regression for the estimation, with measures of the regulatory framework for protecting financial consumers as instruments. We find that, while access to formal financial services has a positive effect on economic development irrespective of a country’s income status, access to informal financial services may positively or negatively affect economic development depending on its source. Further, while formal finance on economic development is positive irrespective of a country’s level of development, informal finance is unfavourable for high and middle-income economies. Our findings indicate that the policy choice of broadening access to formal rather than informal financial services is in the right direction. Policymakers should thus intensify efforts at expanding access to formal financial services for enhanced economic development. Nevertheless, policymakers should be mindful of the source contingent impact of informal finance on economic development.

Improving the Use of Islamic Banking Services in Financing Investment Projects in Uzbekistan

Financial inclusion is remained low level by the majority of households and firms in Uzbekistan, instead of using formal finance, they are more partial to save and borrow informally. In this case, both indicate the high cost of finance as the top reason for not using it. Moreover, households, which are mostly Muslim, declare that religious reasons prevent them from using formal finance, as only conventional finance is available. The result of the survey was passed between a number of households and entrepreneurs that most of them claimed to use Islamic banking products. On the other hand, there are not created main mechanisms, infrastructure, and other important devices to regulate Islamic banking services in the country. The major objective of this study was to investigate there were used some Islamic banking products under some conventional banks for two decades and we have discussed the empirical experiences in Uzbekistan as well as given recommendations for improving the use of Islamic financial services related to foreign experiences and the result of the survey.

Financial Inclusion Measurement in the Least Developed Countries in Asia and Africa

The purpose of this paper is to examine the determinants of financial inclusion in the least developed countries in Asia and Africa. We used World Bank data to estimate the probit econometric technique in the studied countries. The results show that young people and women are groups excluded from financial inclusion and that education and income are two of the key pillars for increasing financial inclusion. Furthermore, the results reveal that a higher level of financial inclusion increases the level of official savings in countries, which in turn promotes their development. The findings of this study are beneficial for policymakers in the least developed countries to promote innovative approaches to enhance the involvement of excluded people in formal finance.

Participation, Income Effect and Challenges of Village Savings and Loans Program in Garu and Tempane Districts of the Upper East Region, Ghana

Village Savings and Loans Associations (VSLAs), have the aim of reducing poverty and creating assets to rural dwellers who have limited access to formal finance due to high collateral requirements. However, since the implementation of VSLAs in the Garu and Tempane districts for over a decade, there is inadequate evidence as to the impact of VSLAs on the lives of the participants. Not only that, there is the need to find out the current and anticipated challenges faced by the participants in the program. This study analyzed the effect of VSLAs on the income of households in Garu and Tempane districts. Data was collected from 100 respondents, 50 direct beneficiaries and 50 non beneficiaries from 3 and 2 communities in Garu and Tempane districts respectively. A Heckman treatment effect model was used to analyze the determinants of participation and the effect of participation on income. The results showed that participants of the VSLA program had an annual income of about GH₵ 2016.60 more than the non-participants. Decision to join VSLAs is mainly influenced by age, the years a respondent spends in the community, the number of active labor force in a household and whether a respondent is a native or migrant. However, based on the challenges identified, it is recommended that the government and other institutions interested in rural development should institute appropriate policies that will help enhance participation in the program. Also, the associations should enforce tougher sanctions on members who absent themselves from meetings without prior notice.

Access to Finance, Indigenous Technology and Food Security in Nigeria: Case Study of Ondo Central Senatorial District

Research purpose: Food security remains a major component of economic development. Many developing nations are facing challenges of food insecurity, which had contributed to starvation and other societal problems. With adequate food intake, human healthy living is assured. This study investigates the impact of access to formal finance and indigenous technology and knowledge on food security in Ondo central senatorial district in Ondo state, Nigeria.Methodology: In total, 216 farmers were sampled, and data were collected through a well-structured questionnaire and focus interviews. Data collected were analysed using descriptive statistics and logit estimation technique.Findings: Descriptive statistics show that there are more male farmers (61.1%) than female counterparts (38.9%), with most of the farmers (42.7%) in their ages 56 years and above and with 51.9% having primary education. Majority of the farmers (65.7%) engage in arable crop farming, while 15.2 and 19.1% engage in cash crop and livestock farming, respectively. The econometric model reveals that age, income, gender, education, marital status, religion, family size, assets owned and distance are major determinants of a farmer’s decision on account ownership, savings and borrowing. Indigenous knowledge of soil fertility, disease-resistant and quickly-growing crops, food storage, local weather, water management, pest and diseases control are significant determinants of food security in Ondo central senatorial district. Likewise, account ownership, savings and borrowing from formal financial institutions are significant determinants of food security.Practical implications: It is, therefore, important that efforts to ease access to formal financial services and improve indigenous technology to serve as complement to modern farming techniques to achieve food security be made a priority by government and private institutions.