Integration of financial inclusion and microfinance in developing countries

Abstract

This doctoral thesis contributes to studies in development economics, which in particular, financial inclusion, microfinance, and women empowerment. It comprises three separated chapters of theoretical and empirical discussions as below. Chapter 1 quantitatively examines how the incoming remittances affect financial inclusion using a global aggregate dataset from World Bank Findex in the year 2017. Three principal measures of financial inclusion are the possessions of account (at a formal financial institution), debit card and credit card. The findings indicate that the influences of receiving remittances are significant on the probability of account and debit card ownership, but not on credit card. Besides, the extended estimations regarding saving activities show that remittances induce saving, especially for business investment and at informal channels. Further, the clustering approach divides the sample into four country groups of similar socioeconomic settings, which later shows that the driven effects of remittances are stronger in lower income country groups rather than in the wealthier countries. Chapter 2 focuses on the digital application of microfinance institutions (MFI). In particular, it investigates the impact of female borrowers, who comprise the majority of microfinance programs, on the probability of MFIs owning a website and offering mobile banking services. Digitalization or technology adoption is proxied by the availability of websites and mobile banking services at disposal. The sample includes 311 MFIs from 23 Asian countries with information of technology adoption being self-gathered, combined with other data related to the properties of MFIs, countries or regions being taken from MIX Market, and World Bank. This is one of the first regressionbased analyses on this aspect, particularly look at the relationship of female borrowers and technology in the microfinance sector. The conclusions show that women borrowing induces the availability of website but not the mobile financial services, except for the South Asia region where microfinance programs are very prevalent. Further, profit-oriented MFIs which are believed to have more freedom in financial sources and comparative advantage in infrastructure, are more likely to digitalize their services. Overall, the finding emphasizes on the importance of maintaining a sufficient women client proportion with appropriate financial literacy in developing technology system in MFIs. Chapter 3 investigates the impact of business and gender training on the level of women empowerment at one of the MFIs in Vietnam. Through the random control trial, women empowerment is quantified over both short and long time periods. At first, the factor analysis helps to construct an index which categorizes the empowerment concept into three layers: individual, household and community. After that, the difference in difference approach is applied to measure the training impact. The results show that the training overall increases women empowerment in all three levels, especially when the husbands are invited to join the training too. Particularly when there is husbands’ presence, the individual and community empowerments are significantly higher even in a longer time period. Notably, living in a crowded family could potentially be an issue that hinders the empowerment at household level. In conclusion, the overall studies suggest different approaches to facilitate financial inclusion, either by promoting appropriate means of transaction for the unbanked; utilizing technology so that MFIs can scale up current products and bring reciprocal benefits for both clients and their own businesses; or delivering tailor-made training that emphasizes not only on monetary but also on non-monetary aspects, aiming at sustainable results in the long run. Inclusive growth is attainable by not only expanding the possibilities, but also bringing the gaps - helping individuals take advantage of economic opportunities that many are lack thereof.