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Digital and traditional financial inclusion: Trends and drivers

Author

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  • Sha’ban, Mais
  • Ayadi, Rym
  • Forouheshfar, Yeganeh
  • Challita, Sandra
  • Sandri, Serena

Abstract

This study examines the drivers of traditional and digital financial inclusion, emphasizing the catalytic role of digital inclusion in propelling traditional financial inclusion. Utilizing global data from 2004 to 2020, we construct two multidimensional financial inclusion indices: digital and traditional, and observe time trends. We then explore country-level determinants of traditional and digital financial inclusion with a special focus on banking system conditions. Finally, we investigate the role of digital financial inclusion in driving the traditional financial inclusion. Results show a significant improvement in financial inclusion over the period studied. The top countries for digital financial inclusion are primarily African developing nations, while high-income European countries lead in traditional inclusion. In terms of determinants, our main findings reveal that banking system conditions, mobile penetration, and urbanization significantly impact the level of digital and traditional financial inclusion. Moreover, we demonstrate that digital financial inclusion paves the way towards traditional financial inclusion in the medium term.

Suggested Citation

  • Sha’ban, Mais & Ayadi, Rym & Forouheshfar, Yeganeh & Challita, Sandra & Sandri, Serena, 2024. "Digital and traditional financial inclusion: Trends and drivers," Research in International Business and Finance, Elsevier, vol. 72(PB).
    • Handle: RePEc:eee:riibaf:v:72:y:2024:i:pb:s0275531924003210
    DOI: 10.1016/j.ribaf.2024.102528
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    Keywords

    Financial inclusion; Digital financial inclusion; Index construction; Cross-country analysis; Banking system conditions;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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