The impact of financial inclusion on consumers saving and borrowing behaviours: a retrospective cross-sectional evidence from the UAE and the USA

This paper highlights the impact of financial inclusion on borrowing and saving decisions in the United States (USA) and the United Arab Emirates (UAE). It does so, using data from the 2014 Global Findex database, and an empirical strategy that contrasts fully parametric and semi-parametric specifications of the saving and borrowing functions. The semi-parametric bivariate probit specification is found to better describe the two processes of saving and borrowing, with a 12.3% correlation coefficient. Although no significant difference is found in the likelihood of borrowing in the two economies, we found however, that consumers in the US are 31.4% more likely to save than their UAE counterparts. In addition, and in line with the "Permanent Income Hypothesis", the results do not reveal any income based saving nor borrowing gradient in the two economies. Conversely, a gender based saving (12.4%) and borrowing (13.8%) inequality in favour of the male gender in found to prevail. Furthermore, access to a bank account and a debit card, companies' policy of direct salary deposits, and government transfer programs are all financial inclusion strategies that are found to significantly raise the likelihood of saving and borrowing in the two nations.