Does financial innovation foster financial inclusion in Arab world? examining the nexus between financial innovation, FDI, remittances, trade openness, and gross capital formation

Abstract

The present paper aims to study the impacts of financial innovation on financial inclusion for selected 22 Arab countries from 2004 to 2020. It considers financial inclusion as a dependent variable. It describes ATMs and the number of commercial banks’ depositors as proxy variables. In contrast, financial inclusion is considered an independent variable. We used the ratio between broad and narrow money to describe it. We employ several statistical tests such as lm, Pesaran, and shin W-stat, a- tests for cross-section dependence, and unit root and panel granger causality with NARDL and system GMM approaches. The empirical results reveal the significant nexus between these two variables. The outcomes suggest that adaptation and diffusion of financial innovation play catalyst roles in bringing unbanked people into the financial network. In comparison, the inflows of FDI establish mixed positive and negative effects, which vary with model estimation following different econometrical tools. It is also revealed that FDI inflow can augment the financial inclusion process, and trade openness can play a directive role and enhance the financial inclusion process. These findings suggest that financial innovation, trade openness, and institutional quality should continue in the selected countries to enhance financial inclusion and promote capital formation in the selected countries.

The role of ICT investment, digital financial inclusion, and environmental tax in promoting sustainable energy development in the MENA region: Evidences with Dynamic Common Correlated Effects (DCE) and instrumental variable-adjusted DCE

“…One of the essential strategies to encourage the adoption of renewable energy sources is financial openness, which explains the capacity of a nation to integrate renewable energy sources such as solar, wind, and hydroelectric power into its energy system is determined by its financial accessibility and ability to attract FDI, offering us hope that we may minimize our dependence on fossil fuels and the harm they cause. Foreign direct investment [FDI] in a more established renewable energy industry may also teach developing nations a lot [FDI] [ 124 , 125 , 141 , 142 ]. This information sharing contributes to a greater worldwide utilization of renewable energy sources.…”

Nexus between financial development, foreign direct investment, and renewable energy consumption: Evidence from SSA

“…Access to funding is crucial for the implementation of renewable energy projects. The study (22,(40)(41)(42) argues that enhanced finance and investment accessibility empowers enterprises and people to allocate resources toward renewable energy technologies, including solar, wind, and hydroelectric power. In addition, implementing financial advancements like green bonds and venture capital financing has supported the expansion of renewable energy initiatives in several nations.…”

“…International trade facilitates the interchange of goods, services, and technologies. Nevertheless, the negative coefficient of TO suggests that increased trade openness may not necessarily result in a higher uptake of renewable energy (22,(127)(128)(129)(130)(131)(132). Increased trade openness could lead to heightened competition from more affordable, non-renewable energy sources in international markets, potentially reducing the demand for renewable energy options.…”

“…It requires a comprehensive and integrated approach from policymakers, financial institutions, and stakeholders to promote sustainable development and accelerate the transition towards a clean energy future (16)(17)(18). The nexus between financial development, foreign direct investment, and renewable energy consumption is becoming increasingly important (19)(20)(21)(22)(23)(24)(25)(26). Financial development, such as the availability of credit and investment opportunities, is crucial in facilitating foreign direct investment in the renewable energy sector (27).…”

Clarifying the relationship between green investment, technological innovation, financial openness, and renewable energy consumption in MINT

“…Renewable energy has substantially impacted technological innovation in developing new renewable energy technologies and the economy. Here are a few examples of how renewable energy has influenced technological advancement: Significant investments have been made in research and development (R&D) for new renewable energy technologies due to the growing demand for renewable energy [ 35 ]. This has resulted in the development of innovations and advancements in the field of renewable energy, such as enhancements in solar panel efficacy, wind turbine design, and energy storage technology [ 36 , 37 ].…”