Financial Stability and Financial Inclusion

Morgan, Peter J.; Pontines, Victor

doi:10.2139/ssrn.2464018

Cited by 135 publications

(111 citation statements)

References 15 publications

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“…Similarly the greater the number of SME borrowers, the lower the probability of default which indicates more financial stability as we found significant positive effects of SMEBTB on financial stability. Our results are consistent with the findings of (Han & Melecky 2013;Hannig & Jansen 2010;Morgan & Pontines 2014;Okpara 2011). Thus, we argue that broader access to and use of finance for SMEs lead to significantly improve resilience of the overall financial system and thus financial stability.…”

Section: Estimated Results With the Baseline Modelsupporting

confidence: 93%

“…Among control variables, similar to the findings of Morgan and Pontines (2014), we found significant positive impacts of GDP per capita on Z-score; that is countries with higher income are less likely to be financially instable. We also found that uses of more percentage of liquid assets to deposits and short term funding leads to more financial stability.…”

Section: Estimated Results With the Baseline Modelsupporting

confidence: 82%

“…We also found that uses of more percentage of liquid assets to deposits and short term funding leads to more financial stability. This finding is in line with Han and Melecky (2013) and Morgan and Pontines (2014). Empirical findings also indicate that the more proportion of private credit to GDP the greater the financial stability of financial institutions.…”

Section: Estimated Results With the Baseline Modelsupporting

confidence: 80%

“…Using data from 2004, Morgan and Pontines (2014 investigated the causal relation and found that financial inclusion, measured by proportion of credit provided to small and mediumsized enterprises, SMEs, promotes stability of the financial system. Han and Melecky (2013) examined the link between financial inclusion and financial stability.…”

Section: Previous Empirical Studiesmentioning

confidence: 99%

“…Thus, in order to measure financial stability, based on the availability of data we use proxy variable namely bank Z-score. Z-score is a popular measure of financial stability employed by a more number of scholars (Čihák & Hesse 2010;Diaconu & Oanea 2014;Morgan & Pontines 2014, Rajhi & Hassairi 2013. A higher Z-score indicates a lower probability that a country's banking system will become unstable and a lower Z-score indicates higher probability of default by financial institutions.…”

Section: Dependent Variablementioning

confidence: 99%

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Does Financial Inclusion Induce Financial Stability? Evidence from Cross-country Analysis

Siddik¹,

Kabiraj²

2018

AABFJ

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In recent times, financial inclusion and financial stability issue have become a priority on policy agendas across the world. However, there is relative dearth of empirical studies addressing and establishing the link between the same. This study fills this gap. Using panel data of 2001-2013, this study empirically investigated whether financial inclusion contributes to country's financial stability, measured by Z-score. Robust results from GMM dynamic panel data estimator show that financial inclusion variables as measured by number of SME borrowers to total borrowers and ratio of outstanding SME loans to total loans have significant positive contributions to financial stability. Findings also indicate that GDP per capita, liquidity, proportion of private credit to GDP are positively and proportion of domestic credit provided to private sector and financial crisis are negatively associated with financial stability. Empirical findings of this study is of greater significance to the policymakers as it will invoke the attention of governments and policymakers to undertake such policies to accelerate financial inclusion of their countries which in turn will lead to country's greater financial stability. This study also contributes to empirical literatures of the issue of financial inclusion and financial stability by reconfirming (or otherwise) findings of previous studies. KeywordsFinancial stability, financial inclusion, financial openness, GMM dynamic panel estimator, robustness. AbstractIn recent times, financial inclusion and financial stability issue have become a priority on policy agendas across the world. However, there is relative dearth of empirical studies addressing and establishing the link between the same. This study fills this gap. Using panel data of 2001-2013, this study empirically investigated whether financial inclusion contributes to country's financial stability, measured by Z-score. Robust results from GMM dynamic panel data estimator show that financial inclusion variables as measured by number of SME borrowers to total borrowers and ratio of outstanding SME loans to total loans have significant positive contributions to financial stability. Findings also indicate that GDP per capita, liquidity, proportion of private credit to GDP are positively and proportion of domestic credit provided to private sector and financial crisis are negatively associated with financial stability. Empirical findings of this study is of greater significance to the policymakers as it will invoke the attention of governments and policymakers to undertake such policies to accelerate financial inclusion of their countries which in turn will lead to country's greater financial stability. This study also contributes to empirical literatures of the issue of financial inclusion and financial stability by reconfirming (or otherwise) findings of previous studies.JEL Classification: G21, G28, O16.

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Section: Estimated Results With the Baseline Modelsupporting

confidence: 93%

Section: Estimated Results With the Baseline Modelsupporting

confidence: 82%

Section: Estimated Results With the Baseline Modelsupporting

confidence: 80%

Section: Previous Empirical Studiesmentioning

confidence: 99%

Section: Dependent Variablementioning

confidence: 99%

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Does Financial Inclusion Induce Financial Stability? Evidence from Cross-country Analysis

Siddik¹,

Kabiraj²

2018

AABFJ

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Financial inclusion, economic freedom and financial stability in sub‐Saharan Africa

Frimpong

Yusuf

Boateng

et al. 2023

Thunderbird Intl Bus Rev

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Executive Summary The study examines the role of economic freedom in the relationship between financial inclusion and stability in sub‐Saharan African economies. By employing the System General Method of Moment and data from 39 sub‐Saharan African countries between 2004 and 2017, the study examines whether economic freedom (i.e., financial and business freedom) conditions the effect of financial inclusion on stability. Results from the study show evidence of a positive impact of financial inclusion on financial stability in sub‐Saharan African economies. Again, the results depict that financial inclusion could better enhance financial stability in economies with a high level of economic freedom (i.e., financial and business freedom). The results suggest that policymakers should allow financial institutions to operate with the level of freedom required to provide services at the lowest possible price. Further, it is recommended that policymakers should ensure that administrative requirements are minimal, bureaucracy costs are lesser, and licensing regulations for startups and expansion of existing firms are friendly. With this, associated increases in business and financial freedom would have promising implications for the relationship between financial inclusion and stability. Managerial Implications of the Study This research is very vital for firms in both the financial and nonfinancial. Specifically, managers of firms in the financial sector can embrace the level of financial freedom that would be allowed by the government, to come up with new and inclusive financial products, while putting in measures not to endanger the stability of the financial sector. Managers in the business sector could also take advantage of the business freedom that would be allowed by the government to diversify business operations, increase profitability and avoid causing nonperforming loan problems to banks. Originality/Value The study provides the first insight into how economic institutions condition the effect of financial inclusion on financial stability, which has not been previously studied.

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Empowering the Poor and Enhancing Financial Inclusion from a Multidimensional Perspective

Mohamed¹

2020

Palgrave Studies in Islamic Banking, Finance, and Economics

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Financial Stability and Financial Inclusion

Cited by 135 publications

References 15 publications

Does Financial Inclusion Induce Financial Stability? Evidence from Cross-country Analysis

Does Financial Inclusion Induce Financial Stability? Evidence from Cross-country Analysis

Financial inclusion, economic freedom and financial stability in sub‐Saharan Africa

Empowering the Poor and Enhancing Financial Inclusion from a Multidimensional Perspective

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