Financial Exclusion of the Smallest Economies in the World

Anders Lundvig Hansen and Luís Lima Santos
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Anders Lundvig Hansen: The Salford School of Business, University of Salford, Salford, Manchester, United Kingdom
Luís Lima Santos: CiTUR – Centre for Tourism Research, Development and Innovation, Polytechnic University of Leiria, Leiria, Portugal

Journal of Economic Analysis, 2025, vol. 4, issue 3, 184-211

Abstract: This study investigates the severe financial exclusion experienced in the Democratic People's Republic of Korea (DPRK), positioning it as an extreme case among the world's most isolated and underdeveloped economies. North Korea's exclusion stems from its totalitarian governance, ideological rigidity and extensive international sanctions, which together have dismantled formal access to global financial systems. The regime's response includes widespread use of illicit financial practices, such as money laundering, cryptocurrency theft, counterfeiting, trafficking, production and distribution of narcotics and informal financial networks that bypass restrictions and sustain internal operations while undermining international financial networks and controls. Despite its claims of self-reliance, the DPRK relies heavily on foreign aid and illicit circumvention strategies. The paper outlines potential solutions including phased sanctions relief, humanitarian aid corridors, micro-finance institutions accessible to the population and decentralization reforms. However, the likelihood of implementation remains slim under the current political conditions and leadership. Key limitations include the scarcity of reliable data and the inaccessibility of primary sources within the country. While change must ultimately originate from within, this analysis offers crucial insights into the mechanisms, impacts and potential remedies for extreme financial exclusion in politically closed economies like North Korea.

Keywords: Financial Exclusion; Global Sanctions; Poverty; Inequality; North Korea (search for similar items in EconPapers)
Date: 2025
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