Financial inclusion and gross capital formation: A sectoral analysis approach for the MENA region and EMs |
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| Affiliation: | 1. Bay Atlantic University, USA;2. Rutgers University, USA;3. Bahçeşehir University, TR, Turkey;1. Urban Institute, Kyushu University, Fukuoka, Japan;2. Energy Studies Institute, National University of Singapore, Singapore;3. Stern School of Business, New York University, New York, USA;1. Department of Economics, Sungkyunkwan University, 25-2 Sungkyunkwan-Ro, Jongno-gu, Seoul 03063, South Korea;2. School of the Built Environment, Oxford Brookes University, Gipsy Lane, Oxford OX3 0BP, UK;3. Department of Economics, Jeonbuk National University, 567 Baekje-daero, Geumam 1(il)-dong, Deokjin-gu, Jeonju-si, Jeollabuk-do, South Korea;1. IQS School of Management, Universitat Ramon Llull, Via Augusta, 390, 08017, Barcelona, Spain;2. Universitat de Barcelona, Spain;3. TBS Business School, Spain;4. IQS School of Management, Universitat Ramon Llull, Spain |
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| Abstract: | Most Middle East and North Africa (MENA) governments have firmly committed to financial inclusion as part of a progressive agenda. In this, their objective is to improve the allocation of resources across small and medium firms. Indeed, empirical literature has quantitatively shown that financial inclusion improves nations' aggregate measures of economic success such as growth or inequality. But we know very little of its effects on sectoral variates. This paper contributes to the literature by estimating and comparing the effects of financial inclusion on the relative size of gross capital formation of low-tech sectors in the MENA region. We use a panel of 3-digit level sectoral data on approximately 34 manufacturing industries of the United Nations Industrial Development Organization (UNIDO) for eleven MENA countries and twelve emerging markets (EMs) within the period 2005–2016. The paper focuses in four measures of financial inclusion commonly used in the literature of development: size of commercial bank branches, ATMs, borrowers, and depositors. The results suggest that financial inclusion in MENA has a positive, statistically significant effect on the size of gross capital formation in the low R&D-intensity industries. Thus, policy considerations can be directed towards expanding financial services to other low-tech industries including fabricated metal products and to the medium tech division including repair and installation of machinery and equipment industries. This policy will have greater impact on gross capital formation and, thereby, economic growth. |
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