The Political Economy of the BRICS Countries. Группа авторов. Читать онлайн. Newlib. NEWLIB.NET

Автор: Группа авторов
Издательство: Ingram
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Жанр произведения: Политика, политология
Год издания: 0
isbn: 9789811202223
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      Figure 3: Remittances and wage payments.

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      Notes: Average = Simple average of the figures under each head for BRICS. Others include reasons such as family member already having an account, difficulty in operating the account, etc.

      On a related note, the motives for involuntary exclusion are no less compelling: lack of trust and high cost are still important in several countries, most notably in Russia, with 35% of individuals citing it as important in 2014. It still remains an important concern in the country. This is consistent with Fungacova and Weill’s (2013) results which show that these factors have appeal in a country characterized by several bank failures and, more generally, financial instability.

      Alternative Sources of Borrowings

      Given the evidence on financial exclusion, it therefore remains to be examined as to what alternative sources of credit are relevant, apart from credit from formal sources. In Table 4, we depict these sources of borrowings. The evidence suggests that, on average, ‘family/friends’ typically dominate, with 26% of individuals having accessed credit from these sources in 2017. This factor overwhelms every other consideration in South Africa with closer to 40% of individuals relying on this method for accessing finance. Reliance on private lenders is much more prominent in India, with 4% of individuals having accessed such finance, whereas formal finance is much more important in Russia, its importance having increased from 8% to 14% during this 7-year period.

      While the evidence is consistent with the fact that financial access is a necessary but not sufficient condition to ensure financial inclusion, a much more rigorous analytical framework is necessary to clearly discern this relationship. We turn to this aspect in what follows.

      Determinants of Financial Inclusion

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      Note: NR = Not Reported; Average = Simple average of the figures under each head for BRICS.

      To investigate this carefully, we conduct a cross-country analysis of 32 emerging market and developing economies (EMDEs) for 2017, using the recently released FINDEX database. We use the following dependent variables: (a) the percentage of the population having account at a formal financial institution (age 15+), and (b) the percentage of the population that had saved at a financial institution (age 15+). Without loss of generality, the former is used as a proxy for access to finance and the latter is a proxy for the use of finance. In addition, we control for the overall country’s economic development by using GDP per capita. Inflation is taken as a proxy for macroeconomic stability and domestic credit to private sector as percentage of GDP, and commercial bank branches (per 100,000 adults) are taken as proxies for financial development and financial infrastructure, respectively. Besides, internet usage (per 100 people) is considered to capture the technological infrastructure and educational attainment (captured by the net primary enrolment ratio) as a proxy for human capital. Our focus is on the coefficient for the India dummy.

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      Note: Robust standard errors in parentheses.

      ***p < 0.01; **p < 0.05; *p < 0.10.

      Financial Crisis and Financial Inclusion

      The global financial crisis compelled policymakers to take a fresh look at the financial inclusion initiative. Policymakers have often endorsed marketing to subprime borrowers as a means of ensuring financial inclusion. With the benefit of hindsight, it appears that such over-extension entailed adverse selection, in turn compromising the quality of the credit portfolio of financial entities and sowing the seeds of financial fragility. The position was further exacerbated by regulatory or governmental forbearance which vitiated the overall credit culture.

      With regard to financial inclusion, the crisis provided several lessons.

      First, financial inclusion helps provide a more stable retail base of deposits. Overt reliance on borrowed funds, as was manifest during the crisis, greatly eroded the soundness and resilience of financial institutions. During periods of stress, low-income clients exhibit much more stickiness in their deposit behavior, even as other sources of funds become difficult to roll over. Ratnovski and Huang (2009), for instance, note that the relative resilience of Canadian banks during the crisis was, in large part, driven by their reliance on retail deposits.

      Second, financial inclusion can lead to enhanced financial stability by improving the financial health of the household sector. Lack of access to formal finance can impair the ability of households to receive government transfers, to make payments, or to accumulate cash surpluses for planned expenses or emergencies. In addition, high and usurious interest rates in the informal sector can lead households into a debt trap, with adverse economic and social consequences. Besides lowering both transactions cost and interest burden, such access also entails social benefits such as protection against loss due to theft, improved mechanisms for social transfers, and better economic linkages for the rural and deprived communities. Gine et al. (2012) find that the use of biometric identification