nep-mfd New Economics Papers
on Microfinance
Issue of 2023‒01‒23
five papers chosen by
Rachita Gulati
IIT Roorkee

  1. Money, e-money and consumer welfare By Carli, Francesco; Uras, Burak
  2. Fault Lines in Financial Inclusion By Ozili, Peterson K
  3. Institutional theory of financial inclusion By Ozili, Peterson K
  4. Financial inclusion and sustainable development: an empirical association By Ozili, Peterson K
  5. CBDC, Fintech and cryptocurrency for financial Inclusion and financial stability By Ozili, Peterson K

  1. By: Carli, Francesco; Uras, Burak
    Abstract: We develop a micro-founded monetary model to inquire the role of a privately provided e-money instrument for household consumption smoothing and welfare. Different from fiat money, e-money users pay electronic transaction fees, but in turn e-money reduces spatial separation frictions and enables risk-sharing. We characterize the conditions that promotes e-money to be Pareto improving and the conditions when e-money reduces its users' welfare - despite for the consumption-smoothing it induces. We calibrate our model for the context of M-Pesa in Kenya and conduct a quantitative analysis. Since our quantitative analysis reveals a limited role for privately provided e-money, we recommend the optimality of e-money regulation.
    Keywords: E-Money, M-Pesa, Risk-Sharing, Welfare, Monetary Policy
    JEL: E41 E44 G23 O11
    Date: 2022
  2. By: Ozili, Peterson K
    Abstract: Financial inclusion has been a global development policy priority over the last two decades. Financial inclusion involves providing access to basic financial services and the use of basic financial services to improve the welfare of individuals, households, and businesses. This article identifies the fault lines or vulnerabilities in the way financial inclusion is achieved. These fault lines or vulnerabilities arise from the over-reliance on profit-oriented financial institutions to achieve financial inclusion, the multiple self-interest in the financial inclusion agenda, the unsustainability of policy-induced demand for basic financial services, the lack of safety net to protect poor banked adults from systemic risk events, and the prevalence of financial inclusion-washing that allow agents to misrepresent their support for financial inclusion. The article argued that the world needs to pay serious attention to these fault lines and seek solutions that promote financial inclusion in a sustainable way. The ideas in this article can help policymakers, academics, practitioners, and researchers in assessing the fault lines created by financial inclusion policies and strategies as this is the first step to finding solutions to address the fault lines.
    Keywords: Access to finance, banked adults, fault lines, financial inclusion, financial institutions, formal account.
    JEL: G21 G28 I31
    Date: 2022
  3. By: Ozili, Peterson K
    Abstract: This article advocates a new addition to the theories of financial inclusion which is the institutional theory of financial inclusion. The case for a new theory arises from the role of institutions or non-market structures in influencing the level of financial inclusion. Postulating an institutional theory of financial inclusion is important due to the need to understand financial inclusion from the context of institutions and non-market structures that people have a great deal of trust in. The institutional theory of financial inclusion has the capacity to generate a wide range of testable hypotheses, and can provide the social scientist with tools that are relevant for understanding the broad spectrum of financial inclusion in society.
    Keywords: financial inclusion, institutions, institutional theory, access to finance, non-market structure, culture, unbanked adults, financial exclusion.
    JEL: G21 I31 P37
    Date: 2023
  4. By: Ozili, Peterson K
    Abstract: This paper investigates the association between financial inclusion and sustainable development in a global context. The findings show that high levels of financial inclusion (in terms of higher commercial bank branches per 100, 000 adults) is significantly associated with high levels of sustainable development (in terms of higher electricity production from renewable sources, higher industry productivity, higher adult literacy rate and higher renewable electricity output). Also, higher financial inclusion is significantly associated with low combustible renewables and waste. There is uni-directional granger causality between global interest in sustainable development information and global interest in financial inclusion information particularly in the period after the global financial crisis (GFC) but before the COVID-19 pandemic. The results support global calls for greater financial inclusion and the attainment of the sustainable development goals for the good of all people, the environment and for the planet.
    Keywords: financial inclusion, sustainable development goals, access to finance, energy, renewables, adult literacy, industry, electricity, access to finance, unbanked adults, environment, research and development.
    JEL: G21 I31 Q56
    Date: 2022
  5. By: Ozili, Peterson K
    Abstract: This article presents a discussion of the role of central bank digital currency (CBDC), Fintech and cryptocurrency for financial inclusion and financial stability. We show that Fintech, CBDC and cryptocurrency can increase financial inclusion by providing an alternative channel through which unbanked adults can access formal financial services. CBDC and Fintech services have the potential to preserve financial stability while cryptocurrency presents financial stability risks that can be mitigated through effective regulation. The paper also identified some problems of CBDC, Fintech and cryptocurrency for financial inclusion and financial stability. The paper offered some insight about the future of financial inclusion and the future of financial stability. Although CBDC, Fintech or cryptocurrency can extend financial services to unbanked adults and offer cost-efficient advantages, there are risk considerations that need to be taken into account when using CBDC, Fintech and cryptocurrency to increase financial inclusion and to preserve financial stability.
    Keywords: CBDC, Fintech, cryptocurrency, financial inclusion, financial stability, blockchain, central bank digital currency.
    JEL: E40 E51 E58 E59 G21 O31
    Date: 2023

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