Natural rate of financial inclusion: a global database

This article presents the concept of a natural rate of financial inclusion. It used a simple economic model to construct an index of the natural rate of financial inclusion (NRFI) and thereafter develops a global database for the NRFI. The constructed NRFI is sensitive to fluctuating economic conditions and to adverse economic shocks such as the global financial crisis and the COVID-19 pandemic. Euro Area and upper income countries recorded a high NRFI while Latin America and Caribbean, and Middle East and North Africa countries recorded a low NRFI. The actual level of financial inclusion exceeded the NRFI in the World and in Euro Area, high-income countries, Europe and Central Asia, East Asia and Pacific, North America, upper middle-income, and OECD member countries. In contrast, the NRFI exceeded the actual level of financial inclusion in low-income countries, the Arab countries and in sub-Sahara Africa countries. GDP growth is a stronger determinant of the NRFI than the inflation rate and the unemployment rate. The findings are important to policymakers because the NRFI can guide policymakers in determining whether macroeconomic policies need to be altered to improve macroeconomic conditions and improve the natural rate of financial inclusion or whether explicit financial inclusion policies need to be introduced to increase the actual level of financial inclusion.