Financial Inclusion Convergence in Low-Income and Lower-Middle-Income Countries
DOI:
https://doi.org/10.22555/pbr.v25i3.943Keywords:
Economic convergence, financial inclusion, economic growth, financial intermediaries, financial developmentAbstract
This research investigates the potential existence of financial inclusion convergence and its link with the growth convergence of 39 Low-Income (LI) and Lower-Middle-Income (LMI) countries. This study employs the club convergence technique proposed by Phillips and Sul (2007) to analyze the financial inclusion index based on different financial indicators to determine that LI and LMI countries converge in local and international practices to achieve financial inclusion. The findings support the growth convergence for all countries. Moreover, there is no conclusive evidence of financial inclusion convergence when considering all countries in the sample. However, the study does identify the existence of financial inclusion convergence within specific cluster clubs. This club convergence approach is also applied to other indicators, such as financial availability and the size of financial intermediaries, including bank credit to bank deposits, Central Bank assets, and liquid liabilities. The results indicate that per capita growth convergence aligns with financial inclusion convergence among the identified cluster clubs. The size of financial intermediaries also plays a little role in supporting financial inclusion and economic growth. The convergence of financial inclusion can be possible through sharing innovative digital products and ideas within these countries.
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