Financial Inclusion and Firm Growth in Asean-5 Countries: A New Evidence Using Threshold Regression

Nizam, Rosmah; Karim, Zulkefly Abdul; Sarmidi, Tamat; Rahman, Abdul Malek Abdul

doi:10.1016/j.frl.2020.101861

Cited by 19 publications

(20 citation statements)

References 10 publications

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“…This effect is stronger in competitive banking systems. Nizam et al (2020) examined the impact of financial inclusion on firm development with the application of threshold IJSE 48,7 regression. The study mobilized data on 889 firms covering 5 countries (Malaysia, Thailand, Philippines, Indonesia and Vietnam).…”

Section: Literature Reviewmentioning

confidence: 99%

Financial inclusion, mobile banking, informal finance and financial exclusion: micro-level evidence from Morocco

Ezzahid

Elouaourti

2021

IJSE

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PurposeThis study has a dual purpose. The first is constructing a financial inclusion index to investigate if the reforms implemented during the last decades at the macroeconomic and sectoral levels have contributed to increase the financial inclusion level in Morocco. The second is to deepen the investigation to explore the impact of these reforms at the microeconomic level, by focusing on six major issues: determinants of financial inclusion, links between individual characteristics and barriers to financial inclusion, determinants of mobile banking use, motivations for saving, credit objectives and determinants of resorting to informal finance.Design/methodology/approachFirst, the principal component analysis methodology is mobilized to construct a financial inclusion index for Morocco. Second, the probit model methodology on a micro-level database of 5,110 Moroccan adults is used.FindingsFirst, the financial inclusion index shows that financial inclusion in Morocco over the last two decades has followed different trends. The first period (1999–2004) was characterized by a slight upswing in the level of financial inclusion. In the second period (2004–2012), the level of financial inclusion increased significantly. During the third period (2012–2019), the financial inclusion maintained almost the same level. Second, empirical results showed that the determinants of formal finance and mobile banking are different from those of informal finance. Having a high educational attainment and being a participant in the labor market fosters financial inclusion. Concerning financial exclusion determinants, the results emphasized that a high educational attainment reduces the barriers leading to voluntary exclusion. As income level increases, barriers of involuntary exclusion such as “lack of money” become surmountable. Although "remoteness" and "high cost" are the major barriers to financial inclusion of all Moroccan social classes, the development of mobile banking allows to eliminate, smoothen and/or loosen all barriers sources of involuntary exclusion. As for the barriers causing voluntary exclusion, the Islamic finance model constitutes a lever for the inclusion of population segments excluded for religious reasons. As for the determinants of the recourse to informal finance, being a woman, an older person and having a low educational level (no more than secondary education) increase the probability to turn to informal finance.Research limitations/implicationsThe main limitation of this study is the non-availability of data on the two dimensions (quality and welfare) of financial inclusion. The composite index is constructed on the basis of two dimensions (access and use) for which data are available.Practical implicationsThis study has three main implications. In practice, with the launching of the National Strategy for Financial Inclusion, this work provides empirical grounded evidence that contributes to design financial inclusion policies in Morocco. In research, while the debate on financial inclusion, mobile banking and informal finance has been raging in recent years, Morocco, like many other African countries, has not received coverage on these topics at the household level.Social implicationsFor society, this study provides considerable insight about the segments of population that are financially excluded and the main reasons for their exclusion.Originality/valueThis study enriches the existing literature with four essential contributions. First, it analyzes the evolution of the level of financial inclusion in the Moroccan economy through the development of a synthetic index. Second, it is the first to study the Moroccan population's financial behavior on the basis of micro-level data, which will help understand more precisely their financial behavior and the main obstacles to their inclusion. Third, this study explores the determinants of the use of mobile banking. Fourth, it sheds some light on the main determinants of the recourse to informal finance.

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Section: Literature Reviewmentioning

confidence: 99%

Financial inclusion, mobile banking, informal finance and financial exclusion: micro-level evidence from Morocco

Ezzahid

Elouaourti

2021

IJSE

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“…Research on how financial inclusion (or, more properly, exclusion) affects the performance of firms, individuals, and countries is very rich (Beck & Demirgüç-Kunt, 2006;Fowowe, 2017;Gorodnichenko & Schnitzer, 2013;Levine, 2005;Nizam et al, 2021;Van et al, 2021;Wellalage & Locke, 2016). Findings support the positive relationship of having a broader inclusion of households and firms inside the formal financial systems.…”

Section: Financial Inclusionmentioning

confidence: 74%

“…In low and middle-income countries, these firms are responsible for a significant percentage of total employment; more than 50% of workers are employed by companies with fewer than 100 employees (Ayyagari et al, 2014). Financial inclusion helps alleviate MSMEs' growth constraints and increases their access to external sources of financing, thus helping to level the playing field between firms of different sizes (Beck & Demirgüç-Kunt, 2006;Brixiová et al, 2020;Nizam et al, 2021). Yet, even in developed countries, financial inclusion is not straightforward, especially for microbusinesses.…”

Section: Introductionmentioning

confidence: 99%

Financial inclusion and business practices of microbusiness in Colombia

2023

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Financial inclusion is known to be relevant for improving the growth perspectives of microbusinesses. This research has three aims. First, to explore how adopting business practices can impact the usage of financial products and services of these firms. Second, to determine if higher levels of microbusinesses’ formalization mediate the impact. Third, to establish if there are differences according to gender and education level. A structural equation model was estimated to test these hypotheses while considering the potential endogeneity of the main variables of interest. The model includes latent variables modeled in the form of confirmatory factor analysis. Estimates are based on self-reported information collected through a survey of 1542 microentrepreneurs in 10 Colombian cities in 2019. The results show that microentrepreneurs who adopt (more) business practices have more financial inclusion. No specific category of business practices drives the results. The effect is larger for men than women and is not present for microentrepreneurs of low education levels. Furthermore, personal initiative, a psychological construct, indirectly relates to being more financially included by increasing the adoption of business practices. Finally, there is no evidence that this is driven by higher levels of formalization regardless of the specific set of requirements that are considered. Our findings support efforts to improve business skills in microentrepreneurs and call for more comprehensive public policy strategies. These findings open the door to using soft skill-based training programs that enhance business practices, to improve microbusinesses’ financial inclusion.

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“…In this study, financial development refers to the access, the availability, and the cost of credit finance “through the eyes of subsidiary managers”. To a certain extent, host country-level financial development reflects inclusive finance which is defined as universal access to a wide range of formal financial services at reasonable costs (Nizam et al. , 2021; Leibovici, 2021; Demir and Javorcik, 2020).…”

Section: Theoretical Backgroundmentioning

confidence: 99%

“…In this study, financial development refers to the access, the availability, and the cost of credit finance "through the eyes of subsidiary managers". To a certain extent, host country-level financial development reflects inclusive finance which is defined as universal access to a wide range of formal financial services at reasonable costs (Nizam et al, 2021;Leibovici, 2021;Demir and Javorcik, 2020). Financial development is a formal institution, which shapes behaviour, the sustainability of competitive advantages and ultimately the performance of all firms, including MNE foreign subsidiaries (North, 1990).…”

Section: 12mentioning

confidence: 99%

Export intensity of foreign subsidiaries of multinational enterprises

Nguyen

2022

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PurposeThe author contributes to the theory of the multinational enterprise by examining subsidiary-specific capability in financial management, defined as the stock of knowledge and capability to plan, manage, control and direct financial resources effectively and efficiently, and the perceptions of subsidiary managers of host country financial development as drivers of export intensity (the share of sales that are exported) of foreign subsidiaries of multinational enterprises (MNEs). The author theorizes that subsidiary-specific capability in financial management is conceptually a valuable subsidiary-specific advantage and it is as important as other traditional competitive advantages, such as research and development and marketing intensity. Perceptions of subsidiary managers of host country financial development are argued to be largely related to the characteristics of the host country-specific advantages.Design/methodology/approachThe author uses a survey dataset of the foreign subsidiaries of Western multinational enterprises (MNEs) together with other public data sources.FindingsThe author provides empirical evidence to support for these arguments that export intensity of MNE foreign subsidiaries depends on subsidiary-specific advantages and host country specific advantages.Originality/valueThe study broadens the understanding of the relationships between subsidiary-specific advantage in financial management, host country specific advantage, and export intensity of MNE foreign subsidiaries. In this way, the author makes an original contribution to new internalization theory by emphasizing the internal capability building of subsidiaries. The author discusses the implications of the findings for MNE foreign subsidiary managers, and policy makers because exporting is critical to the overall strategy of foreign subsidiaries, and it also contributes to the balance of trade and economic development of host countries where foreign subsidiaries operate.

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Financial Inclusion and Firm Growth in Asean-5 Countries: A New Evidence Using Threshold Regression

Cited by 19 publications

References 10 publications

Financial inclusion, mobile banking, informal finance and financial exclusion: micro-level evidence from Morocco

Financial inclusion, mobile banking, informal finance and financial exclusion: micro-level evidence from Morocco

Financial inclusion and business practices of microbusiness in Colombia

Export intensity of foreign subsidiaries of multinational enterprises

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