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Inclusive financial systems, urbanisation and climate change in developing countries.
Panel P51 at conference DSA2022: Just sustainable futures in an urbanising and mobile world.
Unequal access to financial services leads to lost opportunities in pursuing higher incomes, education, health and poverty. This panel examines whether and how inclusive financial sector can contribute to creating just and sustainable urban areas.
Long Abstract:
Theoretically, the literature has established a positive relationship between financial development and economic growth. However, this literature presumes that capital is perfectly mobile and does not consider its distributional implications. Unequal access to financial services leads to lost opportunities in pursuing higher incomes, education, health and poverty. Beck, Demirguc-Kunt et al. (2009, p.120) observed that, “without inclusive financial systems, poor individuals and small enterprises need to rely on their personal wealth or internal resources to invest in their education, become entrepreneurs, or take advantage of promising growth opportunities.” Furthermore, finance is also a key input in building sustainable urban development and also in achieving SDGs especially in dealing with global challenges such as poverty, climate change and inequality (UN Habitat 2015; UN Habitat 2018). Moreover, the role of technology in boosting financial sector through the channels of innovation, efficient resource allocation, expedited decision making by use of algorithms, enhanced financial inclusion and its contribution to economic growth and development has been well acknowledged. Technology also eases financial sector functions of monitoring and corporate control, reduces information and transaction costs and enables increased financial access to individuals and small businesses. Furthermore, studies have also shown that urbanisation, innovation and knowledge economy in a networked society integrate in areas where finance and other services are available.
Evidence shows that rural migrants and workers in urban informal sector often lack access to finance and remain largely unbanked in several developing countries. This leads to creation of a gap between banked and unbanked urban residents further triggering a chain of inequalities in access to various services including starting businesses, employment, education, health. Several questions which, therefore, emerge here are: How gap within the urban areas in access to financial services can be narrowed down? How financial products and services can be tailored to meet the needs of rural migrants and informal workers? How can just urban areas be created by driving down the gaps among urban and semi-urban residents? How adoption of financial technology can improve access to finance to these segments of urban population?
As the recent mass exodus of informal workers and rural migrants from large cities and urban areas to rural areas as a fallout of lockdown created by the pandemic has shown substantial implications for workers in the informal sector as they lost their source of earnings and income. This led to high distress and suffering among the workers households. Can such a situation be avoided in the future by improving access to various services including financial services? Although there is a lot of discourse on smart cities, the emphasis on efficient and inclusive financial system which caters to the needs of diverse urban population is missing in this literature. This further reinstates the focus to develop financial sector and improve access to financial services for just and sustainable urbanisation.
Climate change in recent years adds another dimension to this relationship between financial development and urbanisation. With increasing impact of climate change in developing countries such as global warming, droughts, floods and other natural disasters, the rural population is being displaced or being pushed towards the urban areas in search of jobs and livelihood. Inclusive and resilient financial systems will assist in providing opportunities to the rural migrants and improve their well being.
This panel invites papers that can lead to a better understanding of these issues.
In keeping with the conference's approach, this will be a paper-based panel. Presenters will be uploading their papers in advance. These need not be PowerPoint slides alone but could include audio or video as well, lasting no more than 10 minutes. They should include a question when submitting their material which will be discussed in the synchronous session. Each presenter will then get 2 minutes to summarise their key argument and the question they want participants to consider. The session will then open for discussion. The convenor/discussant will go also through the material submitted prior to the session and address participants comments/questions.
The important of financial inclusion on poor people and economic growth. and how financial inclusion can alleviate poverty and develop rural areas .
Paper long abstract:
The purpose of financial inclusion is to deliver financial services to individuals, businesses, and other sectors in society at a sufficient cost to meet their needs. This study examines the effect of financial inclusion on economic growth and poverty in Jordan from 1980- 2020.
Method: This study applies the Autoregressive Distributed Lag (ARDL) model to examine the annual time-series data collected from the Central Bank of Jordan (CBJ), World Bank, and International monetary Funs (IMF). The Augmented Dickey Fuller test (ADF) is used to test the stationarity of variables used in the ARDL model.
Results: The ADF results indicate that all variables are stationary at level 1 I (1) except inflation, which is stationary at level I (0). The study shows that financial inclusion has a significant positive effect on economic growth in both the short and long term. Moreover, the study also indicates that financial inclusion has a significant positive effect on income per capita, which reduces poverty.
Implications: The study confirms finance and growth theory, which asserts that financial services are a positive function of economic growth and reduce poverty. Consequently, this study recommends that extending and enhancing financial inclusion in Jordan needs to be afforded greater effort due to its positive effect on the Jordanian economy generally and on economic growth specifically.
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Short Abstract:
Unequal access to financial services leads to lost opportunities in pursuing higher incomes, education, health and poverty. This panel examines whether and how inclusive financial sector can contribute to creating just and sustainable urban areas.
Long Abstract:
Theoretically, the literature has established a positive relationship between financial development and economic growth. However, this literature presumes that capital is perfectly mobile and does not consider its distributional implications. Unequal access to financial services leads to lost opportunities in pursuing higher incomes, education, health and poverty. Beck, Demirguc-Kunt et al. (2009, p.120) observed that, “without inclusive financial systems, poor individuals and small enterprises need to rely on their personal wealth or internal resources to invest in their education, become entrepreneurs, or take advantage of promising growth opportunities.” Furthermore, finance is also a key input in building sustainable urban development and also in achieving SDGs especially in dealing with global challenges such as poverty, climate change and inequality (UN Habitat 2015; UN Habitat 2018). Moreover, the role of technology in boosting financial sector through the channels of innovation, efficient resource allocation, expedited decision making by use of algorithms, enhanced financial inclusion and its contribution to economic growth and development has been well acknowledged. Technology also eases financial sector functions of monitoring and corporate control, reduces information and transaction costs and enables increased financial access to individuals and small businesses. Furthermore, studies have also shown that urbanisation, innovation and knowledge economy in a networked society integrate in areas where finance and other services are available.
Evidence shows that rural migrants and workers in urban informal sector often lack access to finance and remain largely unbanked in several developing countries. This leads to creation of a gap between banked and unbanked urban residents further triggering a chain of inequalities in access to various services including starting businesses, employment, education, health. Several questions which, therefore, emerge here are: How gap within the urban areas in access to financial services can be narrowed down? How financial products and services can be tailored to meet the needs of rural migrants and informal workers? How can just urban areas be created by driving down the gaps among urban and semi-urban residents? How adoption of financial technology can improve access to finance to these segments of urban population?
As the recent mass exodus of informal workers and rural migrants from large cities and urban areas to rural areas as a fallout of lockdown created by the pandemic has shown substantial implications for workers in the informal sector as they lost their source of earnings and income. This led to high distress and suffering among the workers households. Can such a situation be avoided in the future by improving access to various services including financial services? Although there is a lot of discourse on smart cities, the emphasis on efficient and inclusive financial system which caters to the needs of diverse urban population is missing in this literature. This further reinstates the focus to develop financial sector and improve access to financial services for just and sustainable urbanisation.
Climate change in recent years adds another dimension to this relationship between financial development and urbanisation. With increasing impact of climate change in developing countries such as global warming, droughts, floods and other natural disasters, the rural population is being displaced or being pushed towards the urban areas in search of jobs and livelihood. Inclusive and resilient financial systems will assist in providing opportunities to the rural migrants and improve their well being.
This panel invites papers that can lead to a better understanding of these issues.
In keeping with the conference's approach, this will be a paper-based panel. Presenters will be uploading their papers in advance. These need not be PowerPoint slides alone but could include audio or video as well, lasting no more than 10 minutes. They should include a question when submitting their material which will be discussed in the synchronous session. Each presenter will then get 2 minutes to summarise their key argument and the question they want participants to consider. The session will then open for discussion. The convenor/discussant will go also through the material submitted prior to the session and address participants comments/questions.
Accepted paper:
Session 1 Thursday 7 July, 2022, -Ahmad Alsarayreh (University of Bradford)