DOES FINANCIAL INCLUSION ENHANCE PER CAPITA INCOME IN THE LEAST DEVELOPED COUNTRIES?

Antonio Afonso and M. Carmen Blanco-Arana

No 2024/0316, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: Financial inclusion is a key factor for economic growth in most developing countries. This paper examines the relationship between financial inclusion and Gross Domestic Product (GDP) per capita in the Least Developed Countries (LDCs) using panel data for the period 1990-2021. The empirical evidence suggests that financial inclusion is indeed related to economic growth in the LDCs. We consider different dimensions of financial inclusion: usability (% of bank credit to bank deposits), accessibility (commercial bank branches), concentration (% of concentration of banks) and availability (depositors with commercial banks) to determine which has a greater effect on economic growth in the countries analyzed. Therefore, we assess which dimensions of financial inclusion are a better tool to improve the economic situation in the poorest countries in the world. While we conclude that all dimensions of financial inclusion have a positive effect on economic growth, in the expected direction, we find that not all dimensions affect economic growth similarly. The dimensions ‘accessibility’ and ‘concentration’ are robustly associated with economic growth, while ‘usability’ and ‘availability’ produce a significant but relatively lesser effect in the LDCs.

Keywords: Financial inclusion; GDP per capita; Panel data; LDCs (search for similar items in EconPapers)
JEL-codes: C33 F30 O47 (search for similar items in EconPapers)
Date: 2024-04
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-fle and nep-gro
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Does financial inclusion enhance per capita income in the least developed countries? (2024)
Working Paper: Does Financial Inclusion Enhance per Capita Income in the Least Developed Countries? (2024)
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