Exploring the direct relationship between GDP per-capita and financial inclusion

https://doi.org/10.35912/amor.v1i3.415
Published: Feb 29, 2020

Abstract:

Purpose: This paper predicted the direct relationship between the four indicators of “Financial Inclusion” and “GDP per-capita” of the country. Previous studies presented in this scenario are qualitative in nature.

Research methodology: In this paper, “step-wise multiple linear regression” is used to establish the cause-and-effect relationship between the four indicators of “financial inclusion”; “Deposit accounts per 1000 population”; “Number of credit accounts per 1,000 people”; “Bank branches per 100,000 of adult population”, and “ATMs per 100,000 of adult population” and “GDP per capita”.

Results: Regression model showed only “Credit accounts per 1,000 people” have a significant relationship with the “GDP per capita”. In this article, secondary data were obtained from the RBI website and the reports of international financial institutes.

Limitations: Data on “ATMs” and “Bank branches per 100,000 of the adult population” is not present before 2004, decreasing the depth of analysis.

Contribution: There is a cause-and-effect relationship between the country’s “GDP per capita” and the “F.I.” “Credit accounts per 1,000 people” only have a significant relationship with GDP per capita, so the change in the number of credit account will show a change in GDP per capita for Indian economy.

Keywords: Financial inclusion (F.I), GDP (Gross Domestic Product) per capita, Deposit accounts, Credit accounts, ATMs (Automated Teller Machines), Bank branches

Keywords:
1. Financial inclusion (F.I)
2. GDP (Gross Domestic Product) per capita
3. Deposit accounts
4. Credit accounts
5. ATMs (Automated Teller Machines)
6. Bank branches
Authors:
1 . Saurabh Sonkar
Central University of Jharkhand, Ranchi, India
2 . Ashoke Kr Sarkar
Central University of Jharkhand, Ranchi, India
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How to Cite
Sonkar, S. ., & Sarkar, A. K. . (2020). Exploring the direct relationship between GDP per-capita and financial inclusion. Annals of Management and Organization Research, 1(3), 187–202. https://doi.org/10.35912/amor.v1i3.415
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Vol. 1 No. 3: February
Articles
References

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    Babajide, A. A., Adegboye, F. B., & Omankhanlen, A. E. (2015). Financial inclusion and economic growth in Nigeria. International Journal of Economics and Financial Issues, 5(3), 629–637. https://doi.org/10.38157/business-perspective-review.v2i2.149

    Bech, H., & Kunt, A. D. (2012). Financial inclusion-an on going process.

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    Central, B. I. S., & Chakrabarty, K. C. (2011). Financial inclusion and banks – issues and perspectives. Financial Inclusion: Partnership between Banks, MFIs and Communities, 1–9.

    Chakrabarty, K. C. (2012). Financial inclusion – issues in measurement and analysis. https://doi.org/10.1002/9780470978160.ch11

    Chakravarty, S. R., & Pal, R. (2013). Financial inclusion in India: an axiomatic approach. Journal of Policy Modeling, 35(5), 813–837. https://doi.org/10.1016/j.jpolmod.2012.12.007

    Chibba, M. (2009). Financial inclusion, poverty reduction and the millennium development goals. European Journal of Development Research, 21(2), 213–230. https://doi.org/10.1057/ejdr.2008.17

    Conroy, J. (2006). APEC and financial exclusion: missed opportunities for collective action? Asia-Pacific Development Journal, 12(1), 53–79. https://doi.org/10.18356/339ee7fc-en

    Daoud, J. I. (2018). Multicollinearity and regression analysis. Journal of Physics: Conference Series, 949(1). https://doi.org/10.1088/1742-6596/949/1/012009

    Dinabandhu Sethi, D. A. (2018). Financial inclusion and economic growth linkage: some cross country evidence. Journal of Financial Economic Policy, 10(3), 369–385. https://doi.org/10.1108/JFEP-11-2016-0073

    Evans, O., & Alenoghena, R. (2017). Financial Inclusion and GDP Per Capita in Africa: A Bayesian VAR Model. Journal of Economics and Sustainable Development, 8(18), 44–57. Retrieved from www.iiste.org

    Fund, I. M. (n.d.). Financial Access Survey : Glossary of Indicators and Concepts.

    Gozgor, G., & Gozgor, K. (2013). The relationship between domestic credit and income: Evidence from Latin America. Applied Econometrics and International Development, 13(1), 89–98.

    Iqbal, B. A., & Sami, S. (2017). Role of banks in financial inclusion in India. Contaduria y Administracion, 62(2), 644–656. https://doi.org/10.1016/j.cya.2017.01.007

    Jayanthi, M., & Rau, S. S. (2017). Financial inclusion in India. International Journal of Applied Business and Economic Research, 15(22), 11–16.

    Joseph, J., & Varghese, T. (2014). Role of financial inclusion in the development of Indian economy. Journal of Economics and Sustainable Development, 5(11), 2222–1700. Retrieved from www.iiste.org

    Julie, O. (2013). The relationship between financial inclusion and GDP growth in Kenya. (University of Nairobi). Retrieved from http://erepository.uonbi.ac.ke/bitstream/handle/11295/58543/Oruo_Financial Inclusion and GDP Growth .pdf?sequence=3

    Kablana, A. S. K., & Chhikara, K. S. (2013). A Theoretical and quantitative analysis of financial inclusion and economic growth. Management and Labour Studie. https://doi.org/10.1177/0258042X13498009

    Kapoor, A. (2014). Financial inclusion and the future of the Indian economy. Futures, 56, 35–42. https://doi.org/10.1016/j.futures.2013.10.007

    Kim, D. W., Yu, J. S., & Hassan, M. K. (2018). Financial inclusion and economic growth in OIC countries. Research in International Business and Finance, 43, 1–14. https://doi.org/10.1016/j.ribaf.2017.07.178

    Kim, J. H. (2016). A study on the effect of financial inclusion on the relationship between income inequality and economic growth. Emerging Markets Finance and Trade, 52(2), 498–512. https://doi.org/10.1080/1540496X.2016.1110467

    Kumar, C., & Mishra, S. (2011). Banking outreach and household level access : analyzing financial inclusion in India. 13th Annual Conference on Money and Finance, (February 2011), 1–33.

    Kumar, N. (2013). Financial inclusion and its determinants: evidence from India. Journal of Financial Economic Policy, 5(1), 4–19. https://doi.org/10.1108/17576381311317754

    Lenka, S. K., & Sharma, R. (2017). Does financial inclusion spur economic growth in India? The Journal of Developing Areas, 51(3), 215–228. https://doi.org/10.1353/jda.2017.0069

    Leyshon, A., & Thrift, N. (1995). Geographies of financial exclusion: financial abandonment in Britain and the United States. Transactions of the Institute of British Geographers, 20(3), 312. https://doi.org/10.2307/622654

    Mandira Sarma, J. P. (2011). Financial inclusion and development: a cross country analysis. Journal of International Development, 6(1), 30. https://doi.org/10.14707/ajbr.160020

    Mohan, R. (2006). Reserve bank of India bulletin economic growth , financial deepening and financial inclusion. In Reserve Bank of India Bulletin.

    O’Brien, R. M. (2007). A caution regarding rules of thumb for variance inflation factors. Quality and Quantity, 41(5), 673–690. https://doi.org/10.1007/s11135-006-9018-6

    Park, C.-Y., & Mercado, R. J. (2015). Financial inclusion, poverty, and income inequality in developing Asia. SSRN Electronic Journal, (January 2015). https://doi.org/10.2139/ssrn.2558936

    Rahman, M. S. (2013). Relationship among GDP , per capita GDP , literacy rate and unemployment rate. British Journal of Arts and Social Sciences NoII British Journal of Arts and Social Sciences, 14(December 2011), 169–177. Retrieved from http://www.bjournal.co.uk/BJASS.aspx

    RBI. (2008). Financial inclusion 7.1. RBI, p. 55. Retrieved from https://www.rbi.org.in/scripts/PublicationsView.aspx?id=10494

    Reyes, G. P. (2010). Financial inclusion indicators for developing countries: the Peruvian case. In Cgap. Retrieved from https://www.afi-global.org/sites/default/files/fidwg_peruindicators_priale.pdf

    Roa, M. J. (2014). Financial inclusion in Latin America and the Caribbean: access, usage and quality.

    Emerging Issues in Financial Development: Lessons from Latin America, (April), 91–127. https://doi.org/10.1596/978-0-8213-9828-9_ch2

    Sahay, R., Cihak, M., N’Diaye, P., Barajas, A., & Mitra, S. (2015). Financial inclusion: can it meet multiple macroeconomic goals? In Staff Discussion Notes (Vol. 15). https://doi.org/10.5089/9781513585154.006

    Santiago Carbo, E. P. . G. and P. M. (2005). Financial exclusion. In Palgrave Macmillan. https://doi.org/10.1016/B978-008044910-4.00160-7

    Sarma, M. (2008a). Index of financial inclusion (No. 215). Retrieved from http://hdl.handle.net/10419/176233%0A

    Sarma, M. (2008b). Index of Financial Inclusion (No. Working Paper, No. 215). New Delhi.

    Sathye, M. (2003). Efficiency of banks in a developing economy: The case of India. European Journal of Operational Research, 148(3), 662–671. https://doi.org/10.1016/S0377-2217(02)00471-X

    Sethi, D., & Sethy, S. K. (2019). Financial inclusion matters for economic growth in India: Some evidence from cointegration analysis. International Journal of Social Economics, 46(1), 132–151. https://doi.org/10.1108/IJSE-10-2017-0444

    Sharma, A., & Sumita, K. (2013). An analytical study:relevance of financial inclusion for developing nations. Research Inventy: International Journal Of Engineering And Science, 2(6), 15–20. Retrieved from https://s3.amazonaws.com/academia.edu.documents/32945705/D033015020.pdf?AWSAccessKeyId=AKIAIWOWYYGZ2Y53UL3A&Expires=1548237843&Signature=VLR0WhhGvjIx1%2FV1297sEk9E7S0%3D&response-content-disposition=inline%3B filename%3DAn_Analytical_Study_Relevance_of_Fi

    Sharma, D. (2016). Nexus between financial inclusion and economic growth: evidence from the emerging Indian economy. Journal of Financial Economic Policy, 8(1), 13–36. https://doi.org/10.1108/JFEP-01-2015-0004

    Srinivasan, N. (2007). Policy issues and role of banking system in financial inclusion. Economic and Political Weekly, 42(30), 3091–3095.

    Swamy, V. (2010). Bank-based financial intermediation for financial inclusion and inclusive growth. Banks and Bank Systems, 5(4), 63–73. https://doi.org/10.2139/ssrn.2126834

    The World Bank. Annual report 2018. World Bank Group.

    Williams, H. T., Adegoke, A. J., & Dare, A. (2017). Role of financial inclusion in economic growth and poverty reduction in a developing economy. Internal Journal of Research in Economics and Social Sciences (IJRESS), 22(1), 19–56.

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  2. Babajide, A. A., Adegboye, F. B., & Omankhanlen, A. E. (2015). Financial inclusion and economic growth in Nigeria. International Journal of Economics and Financial Issues, 5(3), 629–637. https://doi.org/10.38157/business-perspective-review.v2i2.149
  3. Bech, H., & Kunt, A. D. (2012). Financial inclusion-an on going process.
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  5. Central, B. I. S., & Chakrabarty, K. C. (2011). Financial inclusion and banks – issues and perspectives. Financial Inclusion: Partnership between Banks, MFIs and Communities, 1–9.
  6. Chakrabarty, K. C. (2012). Financial inclusion – issues in measurement and analysis. https://doi.org/10.1002/9780470978160.ch11
  7. Chakravarty, S. R., & Pal, R. (2013). Financial inclusion in India: an axiomatic approach. Journal of Policy Modeling, 35(5), 813–837. https://doi.org/10.1016/j.jpolmod.2012.12.007
  8. Chibba, M. (2009). Financial inclusion, poverty reduction and the millennium development goals. European Journal of Development Research, 21(2), 213–230. https://doi.org/10.1057/ejdr.2008.17
  9. Conroy, J. (2006). APEC and financial exclusion: missed opportunities for collective action? Asia-Pacific Development Journal, 12(1), 53–79. https://doi.org/10.18356/339ee7fc-en
  10. Daoud, J. I. (2018). Multicollinearity and regression analysis. Journal of Physics: Conference Series, 949(1). https://doi.org/10.1088/1742-6596/949/1/012009
  11. Dinabandhu Sethi, D. A. (2018). Financial inclusion and economic growth linkage: some cross country evidence. Journal of Financial Economic Policy, 10(3), 369–385. https://doi.org/10.1108/JFEP-11-2016-0073
  12. Evans, O., & Alenoghena, R. (2017). Financial Inclusion and GDP Per Capita in Africa: A Bayesian VAR Model. Journal of Economics and Sustainable Development, 8(18), 44–57. Retrieved from www.iiste.org
  13. Fund, I. M. (n.d.). Financial Access Survey?: Glossary of Indicators and Concepts.
  14. Gozgor, G., & Gozgor, K. (2013). The relationship between domestic credit and income: Evidence from Latin America. Applied Econometrics and International Development, 13(1), 89–98.
  15. Iqbal, B. A., & Sami, S. (2017). Role of banks in financial inclusion in India. Contaduria y Administracion, 62(2), 644–656. https://doi.org/10.1016/j.cya.2017.01.007
  16. Jayanthi, M., & Rau, S. S. (2017). Financial inclusion in India. International Journal of Applied Business and Economic Research, 15(22), 11–16.
  17. Joseph, J., & Varghese, T. (2014). Role of financial inclusion in the development of Indian economy. Journal of Economics and Sustainable Development, 5(11), 2222–1700. Retrieved from www.iiste.org
  18. Julie, O. (2013). The relationship between financial inclusion and GDP growth in Kenya. (University of Nairobi). Retrieved from http://erepository.uonbi.ac.ke/bitstream/handle/11295/58543/Oruo_Financial Inclusion and GDP Growth .pdf?sequence=3
  19. Kablana, A. S. K., & Chhikara, K. S. (2013). A Theoretical and quantitative analysis of financial inclusion and economic growth. Management and Labour Studie. https://doi.org/10.1177/0258042X13498009
  20. Kapoor, A. (2014). Financial inclusion and the future of the Indian economy. Futures, 56, 35–42. https://doi.org/10.1016/j.futures.2013.10.007
  21. Kim, D. W., Yu, J. S., & Hassan, M. K. (2018). Financial inclusion and economic growth in OIC countries. Research in International Business and Finance, 43, 1–14. https://doi.org/10.1016/j.ribaf.2017.07.178
  22. Kim, J. H. (2016). A study on the effect of financial inclusion on the relationship between income inequality and economic growth. Emerging Markets Finance and Trade, 52(2), 498–512. https://doi.org/10.1080/1540496X.2016.1110467
  23. Kumar, C., & Mishra, S. (2011). Banking outreach and household level access?: analyzing financial inclusion in India. 13th Annual Conference on Money and Finance, (February 2011), 1–33.
  24. Kumar, N. (2013). Financial inclusion and its determinants: evidence from India. Journal of Financial Economic Policy, 5(1), 4–19. https://doi.org/10.1108/17576381311317754
  25. Lenka, S. K., & Sharma, R. (2017). Does financial inclusion spur economic growth in India? The Journal of Developing Areas, 51(3), 215–228. https://doi.org/10.1353/jda.2017.0069
  26. Leyshon, A., & Thrift, N. (1995). Geographies of financial exclusion: financial abandonment in Britain and the United States. Transactions of the Institute of British Geographers, 20(3), 312. https://doi.org/10.2307/622654
  27. Mandira Sarma, J. P. (2011). Financial inclusion and development: a cross country analysis. Journal of International Development, 6(1), 30. https://doi.org/10.14707/ajbr.160020
  28. Mohan, R. (2006). Reserve bank of India bulletin economic growth , financial deepening and financial inclusion. In Reserve Bank of India Bulletin.
  29. O’Brien, R. M. (2007). A caution regarding rules of thumb for variance inflation factors. Quality and Quantity, 41(5), 673–690. https://doi.org/10.1007/s11135-006-9018-6
  30. Park, C.-Y., & Mercado, R. J. (2015). Financial inclusion, poverty, and income inequality in developing Asia. SSRN Electronic Journal, (January 2015). https://doi.org/10.2139/ssrn.2558936
  31. Rahman, M. S. (2013). Relationship among GDP , per capita GDP , literacy rate and unemployment rate. British Journal of Arts and Social Sciences NoII British Journal of Arts and Social Sciences, 14(December 2011), 169–177. Retrieved from http://www.bjournal.co.uk/BJASS.aspx
  32. RBI. (2008). Financial inclusion 7.1. RBI, p. 55. Retrieved from https://www.rbi.org.in/scripts/PublicationsView.aspx?id=10494
  33. Reyes, G. P. (2010). Financial inclusion indicators for developing countries: the Peruvian case. In Cgap. Retrieved from https://www.afi-global.org/sites/default/files/fidwg_peruindicators_priale.pdf
  34. Roa, M. J. (2014). Financial inclusion in Latin America and the Caribbean: access, usage and quality.
  35. Emerging Issues in Financial Development: Lessons from Latin America, (April), 91–127. https://doi.org/10.1596/978-0-8213-9828-9_ch2
  36. Sahay, R., Cihak, M., N’Diaye, P., Barajas, A., & Mitra, S. (2015). Financial inclusion: can it meet multiple macroeconomic goals? In Staff Discussion Notes (Vol. 15). https://doi.org/10.5089/9781513585154.006
  37. Santiago Carbo, E. P. . G. and P. M. (2005). Financial exclusion. In Palgrave Macmillan. https://doi.org/10.1016/B978-008044910-4.00160-7
  38. Sarma, M. (2008a). Index of financial inclusion (No. 215). Retrieved from http://hdl.handle.net/10419/176233%0A
  39. Sarma, M. (2008b). Index of Financial Inclusion (No. Working Paper, No. 215). New Delhi.
  40. Sathye, M. (2003). Efficiency of banks in a developing economy: The case of India. European Journal of Operational Research, 148(3), 662–671. https://doi.org/10.1016/S0377-2217(02)00471-X
  41. Sethi, D., & Sethy, S. K. (2019). Financial inclusion matters for economic growth in India: Some evidence from cointegration analysis. International Journal of Social Economics, 46(1), 132–151. https://doi.org/10.1108/IJSE-10-2017-0444
  42. Sharma, A., & Sumita, K. (2013). An analytical study:relevance of financial inclusion for developing nations. Research Inventy: International Journal Of Engineering And Science, 2(6), 15–20. Retrieved from https://s3.amazonaws.com/academia.edu.documents/32945705/D033015020.pdf?AWSAccessKeyId=AKIAIWOWYYGZ2Y53UL3A&Expires=1548237843&Signature=VLR0WhhGvjIx1%2FV1297sEk9E7S0%3D&response-content-disposition=inline%3B filename%3DAn_Analytical_Study_Relevance_of_Fi
  43. Sharma, D. (2016). Nexus between financial inclusion and economic growth: evidence from the emerging Indian economy. Journal of Financial Economic Policy, 8(1), 13–36. https://doi.org/10.1108/JFEP-01-2015-0004
  44. Srinivasan, N. (2007). Policy issues and role of banking system in financial inclusion. Economic and Political Weekly, 42(30), 3091–3095.
  45. Swamy, V. (2010). Bank-based financial intermediation for financial inclusion and inclusive growth. Banks and Bank Systems, 5(4), 63–73. https://doi.org/10.2139/ssrn.2126834
  46. The World Bank. Annual report 2018. World Bank Group.
  47. Williams, H. T., Adegoke, A. J., & Dare, A. (2017). Role of financial inclusion in economic growth and poverty reduction in a developing economy. Internal Journal of Research in Economics and Social Sciences (IJRESS), 22(1), 19–56.