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Impact of financial inclusion on economic growth: review of existing literature and directions for future research

Author

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  • Peterson K. Ozili
  • Adekemi Ademiju
  • Semia Rachid

Abstract

Purpose - The impact of financial inclusion on economic growth is a topic that is generating widespread interest among researchers and practitioners. In this paper, the authors review the existing literature to highlight the state of research in the literature and identify new opportunities for innovative research. Design/methodology/approach - The authors used a thematic literature review methodology which involves dividing the review along relevant themes. Findings - The authors find that significant research on the topic emerged in the post-2016 years. Most of the existing studies are from developing countries and from the Asian and African regions. Existing studies have not utilized relevant theories in explaining the impact of financial inclusion on economic growth. Most studies report a positive impact of financial inclusion on economic growth while very few studies show a negative impact. The most common channel through which financial inclusion affects economic growth is through greater access to financial products and services offered by financial institutions that increases financial intermediation and translates to positive economic growth. The common empirical methodology used in the literature are causality tests, cointegration and regression methods. Multiple proxies of financial inclusion and economic growth were used in the literature which partly explains the conflicting result among existing studies. The review paper concludes by identifying some directions for future research. Originality/value - This paper presents the first rigorous thematic review of the existing literature on the impact of financial inclusion on economic growth. It highlights the main approach that researchers have taken on this topic and identifies some important research areas for future investigation. Peer review - The peer review history for this article is available at:https://publons.com/publon/10.1108/IJSE-05-2022-0339.

Suggested Citation

  • Peterson K. Ozili & Adekemi Ademiju & Semia Rachid, 2022. "Impact of financial inclusion on economic growth: review of existing literature and directions for future research," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 50(8), pages 1105-1122, October.
    • Handle: RePEc:eme:ijsepp:ijse-05-2022-0339
    DOI: 10.1108/IJSE-05-2022-0339
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    1. Tough Chinoda & Farai Kwenda, 2019. "Do mobile phones, economic growth, bank competition and stability matter for financial inclusion in Africa?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 7(1), pages 1622180-162, January.
    2. Suman Dahiya & Manoj Kumar, 2020. "Linkage between Financial Inclusion and Economic Growth: An Empirical Study of the Emerging Indian Economy," Vision, , vol. 24(2), pages 184-193, June.
    3. Tough Chinoda & Joseph Olorunfemi Akande, 2019. "Financial Inclusion, Mobile Phone Diffusion, and Economic Growth; Evidence from Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 9(5), pages 104-110.
    4. Emara, Noha & El Said, Ayah, 2021. "Financial inclusion and economic growth: The role of governance in selected MENA countries," International Review of Economics & Finance, Elsevier, vol. 75(C), pages 34-54.
    5. Minhaj Ali & Shujahat H. Hashmi & Muhammad R. Nazir & Ahmer Bilal & Muhammad I. Nazir, 2021. "Does financial inclusion enhance economic growth? Empirical evidence from the IsDB member countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5235-5258, October.
    6. Daly, Herman E., 1987. "The economic growth debate: What some economists have learned but many have not," Journal of Environmental Economics and Management, Elsevier, vol. 14(4), pages 323-336, December.
    7. Oscar Chiwira, 2021. "The Co-Integrating Relationship between Financial Inclusion and Economic Growth in the Southern African Development Community," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 9(3), pages 170-188.
    8. Moïse Bigirimana & Xu Hongyi, 2018. "Research on Relationship between Financial Inclusion and Economic Growth of Rwanda: Evidence from Commercial Banks with ARDL Approach," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 4(1), pages 7-18, April.
    9. Mr. Kangni R Kpodar & Mihasonirina Andrianaivo, 2011. "ICT, Financial Inclusion, and Growth: Evidence from African Countries," IMF Working Papers 2011/073, International Monetary Fund.
    10. Amrita Chatterjee, 2020. "Financial inclusion, information and communication technology diffusion, and economic growth: a panel data analysis," Information Technology for Development, Taylor & Francis Journals, vol. 26(3), pages 607-635, July.
    11. Kangni Kpodar & Mihasonirina Andrianaivo, 2011. "ICT, Financial Inclusion and Growth: Evidence from African Countries," Post-Print halshs-00602411, HAL.
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    Cited by:

    1. Tuwe Soro Garbobiya & Olajide Oladipo & Paul Terhemba Iorember, 2024. "Financial inclusion and monetary policy targets: Evidence from the ECOWAS countries," Modern Finance, Modern Finance Institute, vol. 2(1), pages 84-100.
    2. Suhrab, Muhammad & Chen, Pinglu & Ullah, Atta, 2024. "Digital financial inclusion and income inequality nexus: Can technology innovation and infrastructure development help in achieving sustainable development goals?," Technology in Society, Elsevier, vol. 76(C).
    3. Jonathan P. Binaluyo & Angelo R. Santos & Noel B. Agustin, 2024. "Challenges and Opportunities for Digital Transformation in Philippine Microfinance Institutions," International Journal of Economics and Financial Issues, Econjournals, vol. 14(5), pages 269-278, September.
    4. Peterson K. Ozili & David Mhlanga, 2024. "Why is financial inclusion so popular? An analysis of development buzzwords," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(1), pages 231-253, January.
    5. Muhittin Kaplan & Mohammed Muntaka Abdul Rahman & Asad-ul-Islam Khan & Hasan Vergil, 2024. "The Triple Impact of Innovation, Financial Inclusion and Renewable Energy Consumption on Environmental Quality in Some Emerging Economies," International Journal of Energy Economics and Policy, Econjournals, vol. 14(4), pages 140-149, July.
    6. Madan Survase & Atmajitsinh Gohil, 2024. "Empowering Self-Help Groups: The Impact of Financial Inclusion on Social Well-Being," JRFM, MDPI, vol. 17(6), pages 1-17, May.
    7. Nicholas Bamegne Nambie & Philomena Dadzie & Dorcas Oye Haywood-Dadzie, 2023. "Measuring the Effect of Income Inequality, Financial Inclusion, Investment, and Unemployment, on Economic Growth in Africa: A Moderating Role of Digital Financial Technology," International Journal of Economics and Financial Issues, Econjournals, vol. 13(4), pages 111-124, July.

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    More about this item

    Keywords

    Financial inclusion; Economic growth; Literature review; Access to finance; GDP; GDP per capita; Causality tests; Regression; Cointegration; Africa; Europe; Asia; Index; Theory; G21; E32;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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