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Financial inclusion and gross capital formation: A sectoral analysis approach for the MENA region and EMs

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  • Rojas Cama, Freddy A.
  • Emara, Noha

Abstract

Most Middle East and North Africa (MENA) governments have firmly committed to financial inclusion as part of a progressive agenda. In this, their objective is to improve the allocation of resources across small and medium firms. Indeed, empirical literature has quantitatively shown that financial inclusion improves nations' aggregate measures of economic success such as growth or inequality. But we know very little of its effects on sectoral variates. This paper contributes to the literature by estimating and comparing the effects of financial inclusion on the relative size of gross capital formation of low-tech sectors in the MENA region. We use a panel of 3-digit level sectoral data on approximately 34 manufacturing industries of the United Nations Industrial Development Organization (UNIDO) for eleven MENA countries and twelve emerging markets (EMs) within the period 2005–2016. The paper focuses in four measures of financial inclusion commonly used in the literature of development: size of commercial bank branches, ATMs, borrowers, and depositors. The results suggest that financial inclusion in MENA has a positive, statistically significant effect on the size of gross capital formation in the low R&D-intensity industries. Thus, policy considerations can be directed towards expanding financial services to other low-tech industries including fabricated metal products and to the medium tech division including repair and installation of machinery and equipment industries. This policy will have greater impact on gross capital formation and, thereby, economic growth.

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  • Rojas Cama, Freddy A. & Emara, Noha, 2022. "Financial inclusion and gross capital formation: A sectoral analysis approach for the MENA region and EMs," International Review of Financial Analysis, Elsevier, vol. 79(C).
    • Handle: RePEc:eee:finana:v:79:y:2022:i:c:s1057521921003094
    DOI: 10.1016/j.irfa.2021.101993
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    Cited by:

    1. Bingchao, Ren & Siyuan, Du, 2024. "The impact of corporate financialization on the export scale of the film industry—Evidence from China," Finance Research Letters, Elsevier, vol. 66(C).
    2. Rojas Cama, Freddy & Emara, Noha & Trabelsi, Mohamed, 2024. "Financial inclusion and the informal sector," Research in International Business and Finance, Elsevier, vol. 70(PB).
    3. Salman Mahmood & Wen Shuhui & Shoaib Aslam & Tanveer Ahmed, 2023. "Financial Inclusion: Does it matter in Alleviating Poverty in Pakistan," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 169(3), pages 1125-1146, October.
    4. Zaidi, Syed Anees Haider & Ashraf, Rana Umair & Khan, Irfan & Li, Mingxing, 2024. "Impact of natural resource depletion on energy intensity: Moderating role of globalization, financial inclusion and trade," Resources Policy, Elsevier, vol. 94(C).
    5. Ghada Tayem, 2022. "Credit Constraints and Investment-Cash Flow Sensitivity in Declining Economic Conditions: The Role of Reliance on Bank Debt," Economies, MDPI, vol. 10(11), pages 1-15, November.

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    More about this item

    Keywords

    MENA; Gross capital formation; Financial inclusion; R&D intensity sectors;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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