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Has financial inclusion made the financial sector riskier?

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  • Ozili, Peterson K

Abstract

This paper examines whether high levels of financial inclusion is associated with greater financial risk. The findings reveal that higher account ownership is associated with greater financial risk through high nonperforming loan and high cost inefficiency in the financial sector of developed countries, advanced countries and transition economies. Increased use of debit cards, credit cards and digital finance products reduced risk in the financial sector of advanced countries and developed countries but not for transition economies and developing countries. The findings also show that the combined use of digital finance products with increased formal account ownership improves financial sector efficiency in developing countries while the combined use of credit cards with increased formal account ownership reduces insolvency risk and improves financial sector efficiency in developing countries.

Suggested Citation

  • Ozili, Peterson K, 2021. "Has financial inclusion made the financial sector riskier?," MPRA Paper 105529, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:105529
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    File URL: https://mpra.ub.uni-muenchen.de/105529/1/MPRA_paper_105529.pdf
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    References listed on IDEAS

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    1. Allen, Franklin & Demirguc-Kunt, Asli & Klapper, Leora & Martinez Peria, Maria Soledad, 2016. "The foundations of financial inclusion: Understanding ownership and use of formal accounts," Journal of Financial Intermediation, Elsevier, vol. 27(C), pages 1-30.
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    Cited by:

    1. Ozili, Peterson Kitakogelu, 2022. "Financial inclusion in Nigeria: an overview," MPRA Paper 113572, University Library of Munich, Germany.
    2. 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.
    3. Ozili, Peterson Kitakogelu, 2021. "Financial inclusion and legal system quality: are they correlated?," MPRA Paper 110518, University Library of Munich, Germany.
    4. Ozili, Peterson K, 2022. "Digital financial inclusion," MPRA Paper 113789, University Library of Munich, Germany.
    5. Zhang, Can & Liang, Qian, 2023. "Natural resources and sustainable financial development: Evidence from South Asian economies," Resources Policy, Elsevier, vol. 80(C).

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    More about this item

    Keywords

    financial inclusion; digital finance; Fintech; financial technology; nonperforming loans; efficiency; financial innovation; insolvency risk; credit card; debit card; formal accounts; account ownership; black swan;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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