FINANCIAL INCLUSION: DOES IT PLAY AN IMPORTANT ROLE IN A COUNTRY? REVIEW OF THE LITERATURE
Damayanthi, N.M. M.
Central Bank of Sri Lanka, Colombo 01, Sri Lanka
manel@cbsl.lk
ORCID: https://orcid.org/0000-0003-1347-6529
ABSTRACT
DOI : 10.57075/jaf1112403
Financial Inclusion (FI) is a key pillar of financial development and inclusive growth in a country. It plays an immense role and is showing an evolving nature around the world. Most research now investigates this concept mainly due to its supportive nature for a country’s development perspectives. Many countries make investments and pay considerable attention to initiating FI agendas and national FI strategies to improve the level of FI in their countries. Economic empowerment through formal financial sector activities, poverty reduction, lowering income inequality, enhancing savings and investments, and improving productivity are some of the contributory factors of FI. Reviewing nearly 50 past literature, this article attempts to develop new literature regarding the importance of FI for a country. Furthermore, the study examines FI definitions and barriers to FI. The findings of the literature reveal that FI directly supports the achievement of a country’s growth objectives. The main contributory factors of FI are employment creation, reducing income inequality and poverty, smoothing the financial sector while maintaining financial system stability, and working with technological developments towards financial activities. However, there are several important bottlenecks such as lack of income, difficult access points due to long distance, barriers to digital finance and payments, and lack of financial knowledge. Affordable financial sector products and services for everyone tend to improve the level of FI. The outcome of the research provides valuable insight for policymakers and responsible authorities to take proactive actions to reach the FI targets by eliminating barriers to FI. In this regard, higher participation of the population towards the formal financial sector in a country is an important element, and actions should be arranged for the gradual transformation of people to achieve this target. The findings of this study further provide avenues for future studies and policy-level decisions, highlighting the fact that FI is an important concept for creating a financially inclusive country.
Keywords-: Barriers to Financial Inclusion, Digital Finance, Economic Growth, Financial Inclusion, Formal Financial Sector
