Financial Inclusion, Digitization, and Resilience: A Global Comparative Analysis

Abstract

Financial inclusion (FI) is a crucial aspect of development, yet 1.4 billion individuals worldwide are still excluded as of 2021. The concept and measurement of financial inclusion remained keenly contested, and there is scanty research on why FI gender and locational gaps continue to persist. Thus, this study examined three objectives: (i) regional differences in the incidence of financial inclusion, (ii) factors causing FI gender and locational gaps, and (iii) the effect of digital financial inclusion on financial resilience. Data for the study was sourced from the Global Findex Database (2021), which contains over 140,000 individuals from 138 countries. Four main econometric techniques namely the Foster-Greer-Thorbecke methodology, general dominance analysis, Blinder-Oaxaca Decomposition and Multilevel probit model were used to address the objectives. Results show significant regional variations in the incidence of financial inclusion, with EAP and ECA regions as the best-performers while SA, MENA and SSA regions being the worst-performers. Again, the most important predictor of people being unbanked globally is that their family member already owns an account, and this factor alone contribute to nearly 43.0 percent of the explained variations in the unbanked. Employment, education, age, and location are the four key factors for closing FI gender and location gaps. Digital financial inclusion significantly stimulates financial resilience across all regions, but its effect is more pronounced in deprived regions like SA, MENA, and SSA. Based on these findings, the study among others, recommended that policymakers should strengthen digital infrastructure and regulatory frameworks to ensure inclusive and resilient financial systems.