Digital Financial Inclusion: COVID-19 Impacts and Opportunities

Abstract

The COVID-19 pandemic has caused the acceleration of digitization and the consideration of digital financial inclusion as a means to minimize negative economic consequences and increase the resilience of households and SMEs. The purpose of this article was to assess the impact of the COVID-19 pandemic on digital financial inclusion by constructing and calculating an integral index of digital financial inclusion (DFI) based on Global Findex Database indicators. The approach to calculating the DFI index and two sub-indices that characterized passive participation in financial relations and active use of digital technologies was based on a linear mathematical model of the integrated indicator and on the use of the Fishburn formula to calculate the weight coefficients. The obtained results proved the acceleration of digital financial inclusion in 2021 and revealed significant differences in DFI between countries and groups of countries according to income level as well as problems of financial exclusion of the most vulnerable groups of population, especially in developing countries. The obtained results regarding the level of DFI are discussed from the point of view of COVID-19 impacts: both directly by influencing consumer behavior and decisions regarding digital financial services and from a broader perspective by influencing business entities, financial service providers, and regulation.

Digital finance: a developing country perspective with special focus on gender and regional disparity

“…Tay et al (2022) in their systematic review of literature, explore the role of digital financial inclusion in achieving sustainable development goals (SDGs) across various countries and conclude that even if digital finance has the potential to reduce poverty in the developing countries (mainly Asian), there exist significant inequalities in terms of income, gender and rural–urban residence that act as bottlenecks to spread of digital financial inclusion. A recent study by Dluhopolskyi et al (2023) used Global Findex Data of 2014, 2017 and 2021 for 142 countries to construct passive and active digital financial inclusion Index to analyze the impact of Covid-19 pandemic on digital financial inclusion. The analysis indicates significant disparity across groups of countries from different income levels in terms of digital financial inclusion, with developing countries being the most vulnerable.…”

Analysis of Systemic Risk on the Financial Performance during the COVID-19 Pandemic: The Case of the Colombian Banking Industry

“…To address the pressures of the COVID-19 pandemic, many banking establishments made use of information technologies to optimize the delivery of their services and overcome accessibility problems, resulting from restrictions imposed by governments to prevent the spread of the virus. In the run-up to the COVID-19 pandemic, the development of innovative technologies such as Artificial Intelligence, the Internet of Things, Blockchain, the growth of FinTech, and the presence of social networks have influenced the financial market and the availability of services for consumers [32].…”

“…The confinement caused serious macroeconomic affectation for many countries, negatively impacting the social and ecological sphere. However, at the same time, there was an accelerated growth of new digital technologies, where opportunities were seen to minimize the negative consequences of the crisis, so that "digital financial inclusion has become a key aspect of household and SME resilience" [32]. To measure the impact of COVID-19 on technology engagement, the authors constructed a digital inclusion index.…”

“…The results show that digital financial inclusion correlates with the World Bank's ranking of countries by income level. Furthermore, the COVID-19 pandemic incentivized more active use of technology by the population to make online purchases or pay bills [32].…”

Mitigating role of financial inclusion on the perceived difficulties, concerns, and borrowing for medical expenses in Saudi Arabia

“…Previous studies in this field demonstrated that increased financial inclusion substantially reduces poverty and income inequality rates [ 9 , 10 ]. The COVID-19 pandemic has accelerated digital financial inclusion, turning it into a potent tool for enhancing financial access and offering assistance to individuals and households during and after the pandemic [ 11 , 12 ]. However, there is scarce literature addressing the impact of financial inclusion on the financial hardship related to health and medical expense concerns.…”