The impact of financial inclusion on economic growth:a literature review

Abstract. Financial inclusion is a process of ensuring the ease access of accessible, available and affordable formal financial service for all adult people of an economy. It is one of the most important prerequisites to economic development. The importance of financial inclusion is now recognized by international as well as national bodies. This thesis is concentrated on explaining how it impacts on economic growth base of previous empirical research work. This thesis work reviews a total of 12 studies that are done by different researchers and the study aims to review that papers on how financial inclusion serves as a mean of inclusive growth. The first part of the thesis is containing the theoretical aspect of financial inclusion, the importance of it, barriers, relationship with growth and how to measure it. The next part gives an overview of financial inclusion. The final part, research findings is the main part of this thesis. In this part, within three-section, numerous studies have been reviewed. 1st section has reviewed the positive impact of four-panel and cross-sectional’s studies. 2nd section also has reviewed the positive impact of different time series and individual country level literature. The last have section reviews negative results between financial inclusion and economic growth. Most of the researchers recommended that policy play a vital role to increase the network branches, dissemination of financial services and eliminate all barriers to access financial service to ensure economically sustainable derived from financial inclusion. Other hands, lack of transparency, frail stock market, weak financial system, lack of transparency, and lack of financial system are responsible for negative impact on growth. All of the studies found a relationship between financial inclusion and economic growth. Some studies found positive and some got a negative result. So, it is could be concluded that financial inclusion has an impact on economic growth