What drives financial inclusion at the bottom of pyramid?: empirical evidence from microfinance panel data

Microfinance has played a key role in including the poor in financial markets. This paper uses microfinance data to approximate financial inclusion in the poorer segments of the population and proposes a quantile regression approach to study the development of microfinance markets. Our approach accounts for the dynamic and heterogeneous impacts that key drivers may have across different stages of market development. It also allows us to go beyond correlations and gets us closer to identifying causal relationships. Our key findings indicate that: i)microfinance markets are more responsive to the needs of the bottom of the pyramid than to potential growth opportunities ii) Enabling institutions that provide credit information become increasingly important with higher market complexity iii) Formal financial development is a complement of microfinance development iv) Technologies can help to overcome market entry barriers, and to enable a higher inclusion in markets with a high degree of complexity. Our results could help policymakers and investors better understand and influence financial inclusion at the bottom of the pyramid across different stages of market development.

Publication infos:
Geneva, The Graduate Institute of International and Development Studies, Centre for Finance and Development, 2015
Publication year:
Number of pages:
75 p.
CFD working paper ; no. 7/2015

 Record created 2015-07-23, last modified 2019-03-01

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