Role of Institutional Quality in Promoting Financial Inclusion

Peter W. Muriu

Working Papers from African Economic Research Consortium

Abstract: Despite evidence on the importance of financial inclusion, little is known about the role institutions play in fostering inclusion across countries. Using panel data corresponding to 125 countries for the period 2004-2015, this study sought to understand the country institutional characteristics associated with the ownership of deposit accounts. A standard regression model is estimated using fixed effects panel data techniques along a financial inclusion proxy and three measures of institutional quality. We provide the first empirical justification for the hypothesis that financial inclusion is non-negligibly driven by the institutional context. Specifically, rule of law is crucial in enhancing financial inclusiveness, more so in sub-Sahara Africa (SSA) where it has a stronger positive effect relative to other regions. In view of the fact that formal finance can be used as a means of boosting economic growth and combating social exclusion, increasing transparency of the legal framework, having fair judicial proceedings and good administration are essential ingredients for raising financial inclusiveness. The evidence presented in this paper may therefore help with the sequencing of institutional reforms that could promote financial inclusion

Date: 2020-06-29
Note: African Economic Research Consortium
References: Add references at CitEc
Citations:

Downloads: (external link)
https://publication.aercafricalibrary.org/handle/123456789/531 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aer:wpaper:eeaa4530-b032-4838-968b-d9f3c414d279

Access Statistics for this paper

More papers in Working Papers from African Economic Research Consortium Contact information at EDIRC.
Bibliographic data for series maintained by Daniel Njiru ().