Financial inclusion and sustainable development in Nigeria

• Authors: Soyemi Kenny Ade’ , Olowofela Olusola Enitan , Yunusa Lateef Adewale
• Languages of publication: EN

Abstracts

EN

Aim/purpose – Financial inclusion is a catalyst for achieving sustainable development. This study attempts to evaluate impact of financial inclusion on sustainable development. Design/methodology/approach – Both Error Correction Model (ECM) and Fully Modified Ordinary Least Square (FMOLS) were used to ascertain the short-run and long-run relationship respectively among the variables which covers the period from 2001 to 2016, as data for HDI (Human Development Index) were available for Nigeria from 2001 through 2016 only. Findings – The result of the analysis indicated that in the short-run there is short-run causality running from a number of commercial bank branches, demand deposit from the rural areas, loan to rural areas to HDI. The long-run result revealed that the explanatory variables consisting of loan to rural areas, number of commercial bank branches and demand deposit from the rural areas all have positive significant impact on HDI in Nigeria. The overall result revealed that financial inclusion has impact on sustainable development in Nigeria. Research implications/limitations – The study recommends that banks and monetary authorities should develop new product and services that will attract savings from the rural dwellers because of the level of significance of their deposit to the development of the country. All the more so as commercial banks should also ensure that the rural dwellers are provided with more bank branches, most especially, in areas where there are few or no banks. Credit facilities should also be provided to the people at an affordable rate as this will uplift the level of inclusion and reduce the level of exclusion in the country which will improve the sustainable development in the country. Originality/value/contribution – Empirically, the study attempted to investigate the impact of financial inclusion on sustainable development in Nigeria. The results of the study suggest that government should continue its effort in the area of poverty alleviation by embracing financial inclusion via a vis financial institutions introducing new financial product and services at lower cost that will cater for the disadvantaged group in the society.

Keywords

EN

Financial inclusion; Poverty alleviation; Sustainable development

• Publisher: Uniwersytet Ekonomiczny w Katowicach
• Journal: Journal of Economics and Management
• Year: 2020
• Volume: 39
• Pages: 105-131

Contributors

author

Soyemi Kenny Ade’

• Department of Accounting. Faculty of Administration and Management Sciences. Olabisi Onabanjo University Ago Iwoye, Ogun State, Nigeria

author

Olowofela Olusola Enitan

• Department of Banking and Finance. Faculty of Administration and Management Sciences. Olabisi Onabanjo University Ago Iwoye, Ogun State, Nigeria

author

Yunusa Lateef Adewale

• Department of Banking and Finance. Faculty of Administration and Management Sciences. Olabisi Onabanjo University Ago Iwoye, Ogun State, Nigeria

References

• Aghion, P., & Bolton, P. (1997, April). A theory of trickle-down growth and development. The Review of Economic Studies, 64(2), 151-172. https://doi.org/10.2307/2971707
• Aker, J. C., Boumnijel, R., McClelland, A., & Tierney, N. (2014). Payment mechanisms and anti-poverty programs: Evidence from a mobile money cash transfer experiment in Niger. Economic Development and Cultural Change, 65(1), 1-38.https://doi.org/10.1086/687578
• Allen, F., Demirgüç-Kunt, A., Klapper, L., & Martinez Peria, M. S. (2012, July). The foundations of financial inclusion: Understanding ownership and use of financial accounts. Journal of Financial Intermediation, 27(C), 1-30. https://doi.org/10.1016/j.jfi.2015.12.003
• Amartya, S. (2000). A decade of human development. Journal of Human Development, 1(1), 17-23. https://doi.org/10.1080/14649880050008746
• Amidžić, G., Massara, A., & Mialou, A. (2014). Assessing countries’ financial inclusion standing: A new composite index (Working Paper, No. 14/36). Washington, DC: International Monetary Fund.
• Andrianaivo, M., & Kpodar, K. (2011). ICT, Financial inclusion and growth: Evidence from African countries (Working Paper, WP/11/73). Washington, DC: International Monetary Fund. Retrieved from https://www.imf.org/external/pubs/ft/wp/2011/wp1173.pdf
• Aportela, F. (1999). Effects of financial access on savings by low-income people. Retrieved from http://users.nber.org/~rdehejia/!@$devo/Lecture%2006%20Microcredit/supplemental/Aportela.pdf
• De Arcangelis, G., Joxhe, M., McKenzie, D., Tiongson, E., & Yang, D. (2015). Directing remittances to education with soft and hard commitments: Evidence from a lab-in-the-field experiment and new product take-up among Filipino migrants in Rome. Journal of Economic Behavior & Organization, 111, 197-208. https://doi.org/10.3386/w2083910.1016/j.jebo.2014.12.025
• Ashraf, N., Gons, N., Karlan, D., & Yin, W. (2003). A review of commitment savings products in developing countries (ERD Working Paper, No. 46). Tokyo: Asian Development Bank. Retrieved from https://www.adb.org/sites/default/files/publication/28185/wp045.pdf
• Ashraf, N., Karlan, D., & Yin, W. (2010). Female empowerment: Further evidence from a commitment savings product in the Philippines. World Development, 38(3), 333-344. https://doi.org/10.1016/j.worlddev.2009.05.010
• Attanasio, O., Augsburg, B., De Haas, R., Fitzsimons, E., & Harmgart, H. (2011). Group lending or individual lending? Evidence from a randomised field experiment in Mongolia (MPRA Paper, No. 35439). London: European Bank for Reconstruction and Development. Retrieved from https://www.ebrd.com/downloads/research/economics/workingpapers/wp0136.pdf
• Banco Central do Brasil. (2010). Report on financial inclusion (No. 1). Retrieved from https://www.bcb.gov.br/Nor/relincfin/report_on_financial_inclusion_n1_2010.pdf
• Banerjee, A., & Newman, A. (1994, May). Poverty, incentives and development. American Economic Review Papers and Proceedings, 84(2), 211-215.
• Banerjee, A., Duflo, E., Glennerster, R., & Kinnan, C. (2015). The miracle of microfinance? Evidence from a randomized evaluation. American Economics Journal: Applied Economics, 7(1), 22-53. https://doi.org/10.1257/app.20130533
• Beaman, L., Karlan, D., Thuysbaert, B., & Udry, C. (2014). Self-selection into credit markets: Evidence from agriculture in Mali (Working Paper, No. 20387). Cambridge: National Bureau of Economic Research. Retrieved from https://data.nber.org/img/wp_icons/pdf.gif
• Beck, T., Demirgüç-Kunt, A., & Honohan, P. (2009). Access to financial services: Measurement, impact and policies. The World Bank Research Observer, 24(1), 119-145. https://doi.org/10.1093/wbro/lkn008
• Beck, T., Demirgüç-Kunt, A., Laeven, L., & Maksimovic, V. (2006). The determinants of financing obstacles. Journal of International Money and Finance, 25(6), 932-952.
• Beck, T., Demirgüç-Kunt, A., & Levine, R. (2007). Finance, inequality and the poor. Journal of Economic Growth, 12(1), 27-49. https:/doi.org/10.1007/s10887-007-9010-6
• Brune, L., Giné, X., Goldberg, J., & Yang, D. (2015). Facilitating savings for agriculture: Field experimental evidence from Malawi (NBER Working Paper, No. 20946). Cambridge, MA: National Bureau of Economic Research. Retrieved from https://www.nber.org/papers/w20946.pdf
• Burgess, R., & Pande, R. (2005). Do rural banks matter? Evidence from the Indian social banking experiment. American Economic Review, 9(3), 780-795. https://doi.org/10.1257/0002828054201242
• Chima, O. (2011). Financial services still shallow in Africa. Retrieved from https:// allafrica.com/stories/201112190299.html
• Demirguc-Kunt, A., Klapper, L., & Singer, D. (2013). Financial inclusion and legal discrimination against women: Evidence from developing countries (Policy Research Working Paper, No. 6416). Washington, DC: World Bank. Retrieved from http://documents.worldbank.org/curated/en/801311468330257772/pdf/wps6416.pdf
• Dupas, P., & Robinson, J. (2013). Why don’t the poor save more? Evidence from health savings experiments. American Economic Review, 103(4), 1138-1171. https://doi.org/10.1257/aer.103.4.1138
• EFInA Survey. (2012). EFInA access to financial services in Nigeria 2012 survey. Qualitative phase. Retrieved from https://www.efina.org.ng/wp-content/uploads/2018/12/EFInA-A2F-2012-surveyFGDKey-Findings.pdf
• EFInA Survey. (2014). EFInA access to financial services in Nigeria 2014 survey. Key findings. Retrieved from https://www.efina.org.ng/wp-content/uploads/2014/12/EFInA-Access-to-Financial-Services-in-Nigeria-2014-Survey-Key-Findings.pdf
• EFInA Survey. (2016). EFInA access to financial services in Nigeria 2016 Survey. Key findings: Profile of the informally served population. Retrieved from https://www.efina.org.ng/wp-content/uploads/2019/02/Did-You-Know-Series-Eight.pdf
• Emas, R. (2015). The concept of sustainable development: Definition and defining principles. Miami: Florida International University.
• Financial inclusion and financial stability: Are they two sides of the same coin? (2011). Address by Shri H. R. Khan, Deputy Governor of the Reserve Bank of India, at BANCON 2011, organized by the Indian Bankers Association and Indian Overseas Bank, Chennai, India, 4 November. Retrieved from https://www.bis.org/review/r111229f.pdf
• Fink, G., Kelsey, J. B., & Masiye, F. (2014). Seasonal credit constraints and agricultural labor supply: Evidence from Zamia (Working Paper, No. 20218). Cambridge, MA: National Bureau of Economic Research.
• Frenk, J., & Knaul, F. M. (2002). Health and the economy: Empowerment through evidence. Bulletin of the World Health Organization, 80(2). Retrieved from https://apps.who.int/iris/bitstream/handle/10665/71225/80%282%2988.pdf?sequence=1&isAllowed=y
• Galor, O., & Zeira, J. (1993). Income distribution and macroeconomics. The Review of Economic Studies, 60(1), 35-52. https://doi.org/10.2307/2297811
• Greenwood, J., & Jovanovic, B. (1990). Financial development, growth and the distribution of income. The Journal of Political Economy,98(5), 1076-1107. https://doi.org/10.1086/261720
• Hannig, A., & Jansen, S. (2010). Financial inclusion and financial stability: Current policy issues (Working Paper Series, No. 259). Chiyoda, Tokyo: Asian Development Bank Institute.
• Human Development Report. (2016). Briefing note for countries on the 2016. New York, NY: Author.
• Ibeachu, E. H. (2010). Comparative analysis of financial inclusion: A study of Nigeria and the UK (Unpublished master degree thesis). Leeds Metropolitan University, Leeds, UK.
• IFC. (2011). Strengthening access to finance for women-owned SMEs in developing countries. Washington, DC: International Finance Corporation and Global Partnership for Financial Inclusion. Retrieved from https://www.ifc.org/wps/wcm/connect/2a9123b3-d369-4115-8cbf-19083218ce64/G20_Women_Report.pdf?MOD=AJPERES&CVID=jqeI-xk
• IMF. (2015). Ending poverty and sharing prosperity (Global monitoring report 2014/2015). Washington, DC: Author. Retrieved from http://pubdocs.worldbank.org/en/637391444058280425/GMR-2014-Full-Report.pdf
• Islam, M. E., & Al Mamun, M. S. (2011). Financial inclusion: The role of Bangladesh bank (Working Paper Series, WP 1101). Dhaka: Research Department, Bangladesh Bank.
• Jack, W., & Suri, T. (2014). Risk sharing and transactions costs: Evidence from Kenya’s mobile money revolution. American Economic Review, 104(1), 183-223. https://doi.org/10.1257/aer.104.1.183
• Johansen, S. (1991, November). Estimation and hypothesis testing of cointegration vectors in Gaussian vector autoregressive models. Econometrica, 59(6), 1551-580. Retrieved from https://www.jstor.org/stable/pdf/2938278.pdf
• Karlan, D., Ratan, A. L., & Zinman, J. (2014). Savings by and for the poor: A research review and agenda. Review of Income and Wealth, 60(1), 36-78. https://doi.org/10.1111/roiw.12101
• Kempson, E., Atkinson, A., & Pilley, O. (2006). Policy level response to financial exclusion in developed economies: Lessons from developing countries. Bristol: Personal Finance Research Centre, University of Bristol.
• King, R., & Levine, R. (1993, December). Finance, entrepreneurship, and growth. Journal of Monetary Economics, 32(3), 513-542. https://doi.org/10.1016/0304-3932(93)90028-E
• Klapper, L., El-Zoghbi, M., & Hess, J. (2016). Achieving the sustainable development goals: The role of financial inclusion. New York, NY: UNSGSA.
• Kodan (Kablana), A. S., & Chikara, K. S. (2011). A theoretical and quantitative analysis of financial inclusion and economic growth. Management and Labour Studies, 38(1&2), 103-133. htpps://doi.org/10.1177/0258042X13498009
• Krishna, A. (2006, February). Pathways out of and into poverty in 36 villages of Andhra Pradesh, India. World Development, 34(2), 271-88. https://doi.org/10.1016/j.worlddev.2005.08.003
• MacKinnon, J. G., Haug, A. A., & Michelis, L. (1999). Numerical distribution functions of likelihood ratio tests for cointegration. Journal of Applied Econometrics, 14, 563-577. https://doi.org/10.1002/(SICI)1099-1255(199909/10)14:5%3C563::AIDJAE530%3E3.0.CO;2-R
• Malhotra, A., Kanesathasan, A., & Patel, P. (2012). Connectivity: How mobile phones, computers and the internet can catalyze women’s entrepreneurship. India: A case study. Washington, DC: International Center for Research on Women and Cherie Blair Foundation for Women. Retrieved from https://www.icrw.org/wpcontent/uploads/2016/10/Connectivity-how-mobile-phones-computers-and-theinternet-can-catalyze-womens-entrepreneurship.pdf
• de Mel, S., McKenzie, D., & Woodruff, Ch. (2014, January). Business training and female enterprise start-up, growth and dynamics: Experimental evidence from Sri Lanka. Journal of Development Economics, 106, 199-210. https://doi.org/10.1016/j.jdeveco.2013.09.005
• Milanovic, B. (2012). Global income inequality by the numbers: In history and now (Policy Research Working Paper, No. 6259). Washington, DC: World Bank. Retrieved from http://documents.worldbank.org/curated/en/959251468176687085/pdf/wps6259.pdf
• Muhammed, S. A., & Wei, J. (2014). Financial inclusion and challenges in Tanzania. Research Journal of Finance and Accounting, 5(21), 2222-1697.
• Morduch, J. (2007). The unbanked: Evidence from Indonesia. The financial access initiative. New York: The Financial Access Initiative and NYU Wagner Graduate School. Retrieved from https://wagner.nyu.edu/files/faculty/publications/2007-03-The-Unbanked-JM.pdf
• Muralidharan, K., Niehaus, P., & Sukhtankar, S. (2014). Building state capacity: Evidence from biometric smartcards in India (Working Paper, No. 19999). Cambridge, MA: NBER. Retrieved from https://econweb.ucsd.edu/~pniehaus/papers/statecapacity.pdf
• National Financial Inclusion Strategy. (2012). Financial inclusion in Nigeria. Summary report. Abuja, Nigeria: Roland Berger Strategy Consultant. Retrieved from https://www.cbn.gov.ng/Out/2012/publications/reports/dfd/CBN-Summary%20Report%20of-Financial%20Inclusion%20in%20Nigeria-final.pdf
• Nigeria Bureau of Statistics. (2010). Retrieved from www.nigerianstat.gov.ng
• Okoye, L. U., Kehinde, A. A., Olayinka, E., & Modebe, M. J. (2017). Financial inclusion: A panacea for balanced economic development. Paper presented at 28th IBIMA Conference: “Theme-Vision 2020: Innovation Management, Development Sustainability, and Competitive Economic Growth”, November 9-10, 2016, Seville, Spain.
• Omojolaibi, J. A. (2017, February). Financial inclusion, governance and economic progres in Nigeria: What happens to the welfare of the poor? Arabian Journal of Business and Management Review (Oman Chapter), 6(7), 72-85. Retrieved from https://www.arabianjbmr.com/pdfs/OM_VOL_6_(7)/3.pdf
• Onaolapo, A. R. (2015). Effects of financial inclusion on the economic growth of Nigeria. International Journal of Business and Management Review, 3(8), 11-28. Retrieved from http://www.eajournals.org/wp-content/uploads/Effects-of-Financial-Inclusion-on-the-Economic-Growth-of-Nigeria-1982-2012.pdf
• O’Neill, D. (1995). Education and income growth: Implications for cross-country inequality. Journal of Political Economy, 103(6), 1289-1301.
• Pande, R., Cole, S., Sivasankaran, A., Bastian, G., & Durlacher, K. (2012). Does poor people’s access to formal banking services raise their income? London: EPPICentre, Social Science Research Unit, Institute of Education, University of London.
• Pannarunothai, S., & Mills, A. (1997, June). The poor pay more: Health-related inequality in Thailand. Social Science & Medicine, 44(12), 1781-1790. https://doi.org/10.1016/s0277-9536(96)00287-0
• Priyanka, S., Xu, K., & Evans, D. B. (2011). Impact of out-of-pocket payments for treatment of non-communicable diseases in developing countries: A review of literaturę (Discussion Paper, No. 2). Geneva: World Health Organization. Retrieved from https://www.who.int/health_financing/documents/dp_e_11_02-ncd_finburden.pdf?ua=1
• Rao, B. B. (Ed.). (2007). Cointegration: For the applied economist. London: Palgrave Macmillan UK.
• Reserved Bank of India [RBI]. (2008, July). Master circular – credit card operations of banks. DBOD.FSD.BC.6/ 24.01.011/ 2008-09. Retrieved from https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=4309
• Sacerdoti, E. (2005). Access to bank credit in Sub-Sahara Africa: Key issue and reform strategies (Working Paper, No. 05/166). Washington, DC: Interaction Monetary Fund. Retrieved from https://www.imf.org/external/pubs/ft/wp/2005/wp05166.pdf
• Sain, M. R. M., Rahman, M. M., & Khanam, R. (2016). Financial exclusion in Australia: Can Islamic finance minimise the problem? Australasian Accounting, Business and Finance Journal, 10(3), 89-104. https://doi.org/10.14453/aabfj.v10i3.6
• Schumpeter, J. A. (1911). The theory of economic development. Cambridge, MA: Harvard University Press.
• Shankar, S. (2013). Financial inclusion in India: Do microfinance institutions address access barriers? ACRN Journal of Entrepreneurship Perspectives, 2(1), 60-74. Retrieved from http://www.acrn.eu/resources/Journals/201302d.pdf
• Somoye, R. O. C. (2018). Multicratic finance, fiscal governance and sustainable development: Where does the money go? Unpublished inaugural lecture presentation, Olabisi Onabanjo University, Ago-Iwoye, Ogun State, Nigeria.
• United Nation. (2017). The sustainable development goals report 2017. United Nations publication issued by the Department of Economic and Social Affairs (DESA). Retrieved from https://www.un.org/development/desa/publications/sdg-report-2017.html
• Voica, M. C. (2017, June). Financial inclusion as a tool for sustainable development. Romanian Journal of Economics, 44(1(53)), 121-129.
• Women’s World Banking. (2012). Microfund for women’s caregiver experience: Lessons from Jordan on health microinsurance. In partnership with Credit Suisse. New York: Author. Retrieved from http://www.womensworldbanking.org/wp-content/uploads/2013/02/InsuranceResReport_Web.pdf
• World Bank. (2001). Finance for growth: Policy choices in a volatile world (Policy Research Report, No. 1). Washington DC: Author and New York: Oxford University Press. Retrieved from http://documents.worldbank.org/curated/en/341151468762914798/pdf/multi0page.pdf
• World Bank. (2002). Year in review (World Bank Annual Report, No. 24908, Vol. 1). Washington DC: Author. Retrieved from http://documents.worldbank.org/curated/en/379051468163155729/pdf/multi0page.pdf
• World Bank. (2008). Banking the poor: Measuring banking access in 54 economies. Washington, DC: Author. Retrieved from http://documents.worldbank.org/curated/en/608761468157765351/Banking-the-poor-measuring-banking-access-in-54-economies
• World Bank. (2014). Financial inclusion (Global Financial Development Report, No. 82556). Washington, DC: Author. Retrieved from http://documents.worldbank.org/curated/en/225251468330270218/pdf/Global-financial-development-report-2014-financial-inclusion.pdf
• World Bank. (2015). Gender equality, poverty reduction, and inclusive growth (World Bank Group Gender Strategy (FY16-23)).Washington, DC: Author. Retrieved from http://documents.worldbank.org/curated/en/820851467992505410/pdf/102114-REVISED-PUBLIC-WBG-Gender-Strategy.pdf

Identifiers

ISSN

1732-1948