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Foreign Banks and Financial Inclusion in Emerging and Developing Economies: An Empirical Investigation

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  • Sasidaran Gopalan
  • Ramkishen S. Rajan

Abstract

An important dimension of the effects of foreign bank presence on financial sector development relates to that of financial inclusion. Despite its significance, the empirical literature offers little evidence on the relationship between foreign banks and financial inclusion. We examine this relationship by focusing on impact of foreign banks on both the accessibility and usage dimensions of financial inclusion for a panel of 50 emerging and developing economies over 2004–2009. Our findings show that foreign banks have a strong positive impact in furthering financial access while tending to impede the usage dimension, which is robust to alternative methodologies and definitions. Copyright © 2018 John Wiley & Sons, Ltd.

Suggested Citation

  • Sasidaran Gopalan & Ramkishen S. Rajan, 2018. "Foreign Banks and Financial Inclusion in Emerging and Developing Economies: An Empirical Investigation," Journal of International Development, John Wiley & Sons, Ltd., vol. 30(4), pages 559-583, May.
    • Handle: RePEc:wly:jintdv:v:30:y:2018:i:4:p:559-583
    DOI: 10.1002/jid.3354
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    Citations

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    Cited by:

    1. Morsy, Hanan, 2020. "Access to finance – Mind the gender gap," The Quarterly Review of Economics and Finance, Elsevier, vol. 78(C), pages 12-21.
    2. Jeleta Kebede & Vincent Tawiah & Ernest Gyapong, 2023. "The effect of corruption on microfinance loan portfolio: A semiparametric analysis," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 31(1), pages 241-268, January.
    3. Tony Cavoli & Sasidaran Gopalan & Ramkishen S. Rajan, 2020. "Does Financial Inclusion Amplify Output Volatility in Emerging and Developing Economies?," Open Economies Review, Springer, vol. 31(4), pages 901-930, September.
    4. Sasidaran Gopalan, 2018. "Does foreign bank entry contribute to financial development? Examining the role of income thresholds," Development Policy Review, Overseas Development Institute, vol. 36(S2), pages 954-983, September.
    5. Thereza Balliester Reis, 2021. "What is financial inclusion? A critical review," Working Papers 246, Department of Economics, SOAS University of London, UK.
    6. Úbeda, Fernando & Mendez, Alvaro & Forcadell, Francisco Javier, 2023. "The sustainable practices of multinational banks as drivers of financial inclusion in developing countries," Finance Research Letters, Elsevier, vol. 51(C).
    7. Nur Diniey Ezzati Zainorin & Syuhada Jalaludin & Nor Farradila Abdul Aziz & Balachandran Balasingam, 2023. "Determinants of Financial Inclusion in OIC Countries," Information Management and Business Review, AMH International, vol. 15(2), pages 9-16.
    8. Kebede, Jeleta & Naranpanawa, Athula & Selvanathan, Saroja, 2021. "Financial inclusion: Measures and applications to Africa," Economic Analysis and Policy, Elsevier, vol. 70(C), pages 365-379.
    9. Ozili, Peterson K, 2023. "Financial Inclusion Expectation Gap," MPRA Paper 116414, University Library of Munich, Germany.
    10. Úbeda, Fernando & Mendez, Alvaro & Forcadell, Francisco Javier, 2022. "The sustainable practices of multinational banks as drivers of financial inclusion in developing countries," LSE Research Online Documents on Economics 115063, London School of Economics and Political Science, LSE Library.
    11. Chris Doucouliagos & Jakob de Haan & Jan-Egbert Sturm, 2022. "What drives financial development? A Meta-regression analysis [A new database of financial reforms]," Oxford Economic Papers, Oxford University Press, vol. 74(3), pages 840-868.
    12. Tony Cavoli & Sasidaran Gopalan & Ramkishen S. Rajan, 2021. "Do macroprudential policies counter real exchange rate appreciation in emerging markets?," The World Economy, Wiley Blackwell, vol. 44(7), pages 2164-2187, July.
    13. Kebede, Jeleta & Selvanathan, Saroja & Naranpanawa, Athula, 2021. "Foreign bank presence, institutional quality, and financial inclusion: Evidence from Africa," Economic Modelling, Elsevier, vol. 102(C).
    14. Gopalan, Sasidaran & Sasidharan, Subash, 2020. "Financial liberalization and access to credit in emerging and developing economies: A firm-level empirical investigation," Journal of Economics and Business, Elsevier, vol. 107(C).

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