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- Convenor:
-
Rashmi Arora
(University of Bradford)
Send message to Convenor
- Location:
- G21 (Richmond building)
- Start time:
- 7 September, 2017 at
Time zone: Europe/London
- Session slots:
- 3
Short Abstract:
Although a large literature exists on finance-economic growth relationship, yet not much is known on how financial sector can lead to sustainable growth and development. In this panel we invite papers which examine how financial sector development can contribute to sustainable development.
Long Abstract:
A large literature suggests that financial sector boosts economic growth by identifying the entrepreneurs who could introduce new goods and production processes and facilitate long-run investment in the high return projects. Yet not much is known on how financial sector can lead to sustainable growth and development. Does an inclusive financial sector which provides access to various financial products and services such as bank accounts, bank credit, savings products, remittances and payment services, insurance services, home mortgage and financial advisory services contribute to sustainable economic development? Research has found that a well-developed formal financial sector at the national and regional levels provides better economic opportunities, high economic growth, reduced poverty and improved well-being. Does this imply that less developed financial systems could lead to poor social cohesion and discontent among the populace and impact sustainability? How can the digitisation of the financial sector lead to sustainable economic growth, the reduction of poverty and inequality and the empowerment of women?
Since the financial crisis, from the experience of sub-prime mortgage borrowers in the US, it has been realized that financial literacy (and literacy in general) is crucial. The failure to comprehend financial products and low regulation can lead to instabilities in the household sector and could create macro instability. Financial stability thus has assumed increased importance in recent years. Does a well-regulated financial sector lead to sustainable economic growth development?
This panel invites papers that can lead to a better understanding of how financial sector development can contribute to sustainable development.
Accepted papers:
Session 1Rashmi Arora (University of Bradford)
Paper short abstract:
This study using World Bank and CGAP database examines extent of financial access in the South Asian countries. The countries included are Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan, Sri Lanka, and India. We also examine digitisation of financial services in the region.
Paper long abstract:
Financial access is gradually being recognised as an important input to economic development. An inclusive financial sector which provides access to various financial products and services also can contribute to sustainable economic development. This study using World Bank and CGAP database examines the extent of financial access in the South Asian countries. Our objective in this study is to examine financial access of countries within the South Asia region (Afghanistan, Bangladesh, Bhutan, Maldives, Nepal, Pakistan, Sri Lanka, and India). We also examine digitisation of financial services in the region. Due to data limitations, the study excludes Bhutan, Afghanistan and Maldives from the analysis and restricts to major countries in the region- Bangladesh, Nepal, Pakistan, Sri Lanka, and India. This region was chosen as it is fast growing, yet has high level of poverty and low human capital development. Further, huge demand for finance in South Asia and its lack of accessibility has been noted by other studies. Our study builds two sets of financial access indices covering banks and non-banks including microfinance separately. The results of the study show that India ranks highest among all the South Asian countries.
Quanda Zhang (Deakin University)
Paper short abstract:
Authors of this paper: Quanda Zhang, Alberto Posso In this paper, we first construct a new indicator for financial inclusion. We then examine the effect of financial inclusion on household income. We find that financial inclusion has a strong positive effect on household income.
Paper long abstract:
Authors of this paper: Quanda Zhang, Alberto Posso
Using national representative household finance survey data covering more than 6200 Chinese households, we first construct a new multidimensional indicator for financial inclusion. Then we examine the effect of financial inclusion on household income. Our results elicit several findings. First, financial inclusion has a strong positive effect on household income. This effect can be found across all households with different levels of income. Second, low-income households are found to benefit more from financial inclusion than high and mid-level income ones. We argue that, in this sense, financial inclusion helps reduce income inequality.
Kenneth Jackson (Auckland Institute of Studies)
Paper short abstract:
This paper considers the way in which finance is seen most often in relation to commercial aggregates rather than issues of distribution and the impact of poverty and inequality, questions of sustainability and equality as between income groups, gender and generations.
Paper long abstract:
Culture, custom and ways of life are important determinants of thinking and objectives. Sustainability as a concept can also be important to these individuals and groups. Replacing a financial theory of value with a sustainable theory of value, leads to further problems with any singular approach. Incorporating the two reveals practical problems to reach a practical operational methodology. The Human Development Index represents a first step to this, but an examination of the problems of diffuse measurement can be seen from an examination of the Millennium Development Goals and the Sustainable Development Goals. Where do finance objectives and operational delivery mechanisms fit within these overall approaches or is availability of finance a constraint rather than a driver of development? Are rates of return and, importantly, future discount rates, as conventionally assessed, out of step with those that groups and individuals operate on in their lives?
The paper is based on the contestation that economic growth is not a sufficient condition for development, if it is a necessary condition is left open for discussion. The enabling, or constraint-easing role of finance and financial operations to development are accepted as valid, as part of the potential contributors to development. How to operate ideas on sustainability in an achievable manner and the way to integrate them into development and the role of finance in so doing, is complex and difficult, but possible.
The paper analyses issues relating monetisation and measurement, the inclusion of sustainability, gender, poverty, distribution and resource use in assessing development.
Maria Sassi (University of Pavia) Naira Harutyunyan (Development Foundation of Armenia)
Paper short abstract:
Green financing landscape for pro-poor investments in Kenya is examined. Clean energy governance framework constantly improves making Kenya a regional pioneer. Successful business models targeting the poor exist that via innovation and cultural appropriateness make a market niche from a problem.
Paper long abstract:
Today, almost one and a half billion people around the world do not have access to modern electricity services and three billion people rely on traditional biomass for cooking and heating, with adverse effects on health, environment and economic development. This streamlines international development efforts to ensure access for all to affordable and clean energy services and stresses the importance of effective financing frameworks for promoting pro-poor green investments. The article aims to examine green financing landscape focusing on supportive policies and innovative green financing models with potential social benefits concentrating on the case of Kenya. The conceptual framework of energy pathways to poverty reduction concept is employed. Empirical evidence acquired from the fieldwork strengthens the research. Results show that clean energy governance framework is constantly improving with the introduction of innovative approaches making Kenya a regional pioneer. Recently, Kenya managed to introduce long-term supportive frameworks for renewable energy development in a form of feed-in tariffs, tax exemptions, net metering, power wheeling, auctioning, licensing, etc. International organizations act as starters for pushing the take-up of renewable mini-grid technologies. However, targeting, assessing and managing the social impacts of projects is not practiced. Nonetheless, successful and sustainable business models targeting the poor exist that through innovation and cultural appropriateness succeed in making a market niche from a problem. Mobile revolution, mix conditions and timing of financing instruments are important.
Karina Jedrzejowska (University of Warsaw)
Paper short abstract:
The paper aims at assessing financial development of South Asian economies, discussing similarities and differences between their financial systems, and assessing impact of financial sector development (inclusive financial inclusion) on sustainable development in the region.
Paper long abstract:
Most South Asian countries began introducing far reaching reforms to the financial sector in in the early 1980s. The reform packages usually included greater competition in the banking sector, improved accounting standards, partial liberalization of capital flows, and strengthening the supervisory framework. Financial sector reforms have contributed to higher domestic savings, increased inflow of foreign capital, and faster economic growth. Changes in financial sector have also deepened economic integration in South Asia, and enabled the region to overcome the effects of the subprime crisis. Yet the financial reforms in South Asia are far from complete. Even India, that has been most successful in the introduction of financial reforms in the 1990s, shows deficiencies in financial supervision and privatization of the banking sector. Moreover, there are still disparities in the level of financial development, and financial cooperation in the region is limited. The proposed paper is meant to characterize the level of financial development of the South Asian economies, discuss similarities and differences between their financial systems, and assess possible contribution of financial sector development (inclusive greater financial inclusion) to sustainable development of the region.
Laure Gnassou (Experienced Economist)
Paper short abstract:
To achieve sustainable peace and development referring to the 2030 Agenda, the DR Congo, a fragile State, must secure sustainable financing. However, it has experienced a multidimensional crisis putting public finance under pressure since 2016.
Paper long abstract:
The implementation of the 2030 Agenda for sustainable development and its associated Sustainable Development Goals (SDGs) will be critical in fragile States facing complex challenges. One of them focuses on financing SDGs in agreement with the Addis Abbas Action Agenda (AAAA) of July 2015. Concerning public revenues, taxation plays a key role in mobilizing domestic revenues, which are essential for investing in SDGs. However, most fragile States, notably the DR Congo, are resource-rich countries encountering difficulties in collecting tax revenues, particularly from extractive industries. They have also recorded a tax base's erosion. This leads to question governance of extractive sector in these countries. In response, an international cooperation in tax matters is required in views of protecting, then broadening tax bases of fragile States.
The paper examines challenges for financing sustainable development in the DR Congo, a conflict-affected country and a Least Developed Country (LDC) in Central Africa. Since 2016, the DR Congo has registered macroeconomic disorders by renewing with inflationary pressures. Meanwhile, it has embarked into political and electoral crises combined with longstanding security and humanitarian crises, mainly in the eastern provinces. The country must address the said crises to achieve sustainable peace and development in accordance with the 2030 Agenda. Public finance is put under pressure.
In 2017-2018, uncertainty surrounding the macroeconomic outlook could be exacerbated by the said crises. The Government's ability to restore a relative macroeconomic stability will be closely monitored during the transition. It is essential to stay on track with the 2030 Agenda.
Gilbert Zana Naab (University of Bradford)
Paper short abstract:
This study assesses the institutional designs of Microfinance institutions (MFIs) against their actual implementation. I argue for effectiveness of MFIs product designs be viewed from both supply and demand sides of the core market and as well consider the livelihood strategies of MF clients.
Paper long abstract:
Poverty still remains one of the world's biggest challenges especially in developing countries; this old and well researched phenomenon presents a renewed development threat to the global commitments to the achievements of the Sustainable Development Goals (SDGs). According to estimates professed by the Global Multidimensional Poverty Index (MPI), 1.6 billion people, living across 108 countries representing 78% of the current global population are multidimensionally poor (Alkire et al. 2014).
To this point, some commentators consider the emergence of microcredit (that later metamorphosed to microfinance) as the game changer in the fight against poverty in the global south (Khandker 1998; Armendáriz and Morduch 2010); but this claim is not without contestations on the actual poverty reducing effects of microfinance interventions (Bateman 2010; Bateman and Chang 2012; Hudon and Sandberg 2013).
The current trend of microfinance commercialization has brought about some schism in the microfinance sector, generating arguments among proponents of welfare and commercial microfinance. With proponents of welfare microfinance arguing that the commercialization drive of the former welfare based MFIs would compromise on the original poverty reduction objectives of MFIs.
This research therefore seeks to assess the institutional designs of microfinance institutions to ascertain whether the reflect the actual implementation designs. The study will be interested in revealing knowledge on factors that impede the effective implementation of microfinance both on the demand and supply; and whether MFIs take into account the livelihoods of their clients in the design of products and services.
Oluwole Oridupa (Leeds Beckett University)
Paper short abstract:
This paper critically discusses implications of commercial microfinance Institutions (CMFIs) in driving formalization of informal enterprises in Nigeria as a case of other developing and emerging countries. The research used Marx’s surplus value theoretical framework, particularly the exploitation of interest- bearing credit.
Paper long abstract:
Microfinance was introduced to fix the failure of credit market system, particularly as development tool to reduce poverty. Microfinance institutions (MFIs) gradually transformed from non-profit to for-profit model commercial microfinance institutions (CMFIs). The present MFIs client-base is referred to micro, small and medium enterprises (MSMEs).
Through the lens of Marx’s surplus value theory, this paper focus on implications of commercial microfinance in driving formalization of informal enterprises in Nigeria as a case of other developing economies.
MFIs are involved in the process financialization and formalization of informal enterprises. Financialization signifies the expansion of financial accumulation, based on changes in politics, economics, culture, politics and social relations (Mader, 2014). Whereas, formalization integrates identity, records and information of active poor entrepreneurs into digital financial system.
The methodology approach is critical realism. Identifying the necessary causal relation and mechanisms of various actors, as conditions for the emergence of the social phenomena (Sayer, 2000; Bhaskar, 2008). Actors within the microfinance institution sector in Nigeria are governance, strategic, operational, international, CMFIs, and beneficiaries. Quantitative and qualitative data including anecdotal evidence from the actors was analysed through the process of retroduction.
The findings reveal that informal enterprise overly dependent on high interest credit. Formalized informal enterprise owned by surplus population (underemployed and unemployed active poor) are exposed to further exploitation by credit capitalist within the commercial microfinance sector. In conclusion, this paper recommends further research on implications of formalization of informal enterprises within CMFIs sector as a developmental strategy towards poverty reduction.