Causality between Financial Performance, Fintech, Financial Inclusion, and Financial Development in Emerging and Developing Economies: A Cross Country Analysis

33 Pages Posted: 18 May 2022

See all articles by Joseph Jr. Aduba

Joseph Jr. Aduba

Ritsumeikan University

Behrooz Asgari

affiliation not provided to SSRN

Hiroshi Izawa

affiliation not provided to SSRN

Abstract

Many empirical studies have examined the determinants of financial development in emerging and developing economies. However, the determinants of financial development are dynamic, multi-layered, and are affected by technological progress and country-specific characteristics. In particular, the causality between financial performance, financial inclusion, fintech penetration, and financial development has not been specifically examined. Using two indexes of financial performance estimated from the information-intensive processes of asset transformations in deposit-taking financial institutions of more than 60 economies, this paper investigates the link between these performance indexes, fintech penetration, financial inclusion, and their joint effects on financial development. The main findings suggest that fintech penetration drives financial development in economies with lower financial inclusion and poor ratio-based financial performance index. In addition, the causality from financial development to financial inclusion, and from the latter to the former coexist. However, the causality from robust financial performance index to financial development is unidirectional. These findings demonstrate that despite poor financial infrastructure and weak financial performance, financial development in developing and emerging economies could be improved by relevant policies that stimulate FinTech innovations.

Keywords: Financial inclusion, FinTech, financial development, financial performance

Suggested Citation

Aduba, Joseph Jr. and Asgari, Behrooz and Izawa, Hiroshi, Causality between Financial Performance, Fintech, Financial Inclusion, and Financial Development in Emerging and Developing Economies: A Cross Country Analysis. Available at SSRN: https://ssrn.com/abstract=4113175 or http://dx.doi.org/10.2139/ssrn.4113175

Joseph Jr. Aduba (Contact Author)

Ritsumeikan University ( email )

Japan
07015822563 (Phone)

HOME PAGE: http://en.ritsumei.ac.jp/

Behrooz Asgari

affiliation not provided to SSRN ( email )

No Address Available

Hiroshi Izawa

affiliation not provided to SSRN ( email )

No Address Available

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