FINANCIAL INCLUSION AND ECONOMIC DEVELOPMENT: TURKEY AND GREECE

Year 2023, Volume: 16 Issue: 1, 232 - 233, 01.02.2023

Suat Teker Dilek Teker Halit Guzelsoy

https://doi.org/10.17261/Pressacademia.2023.1704

Abstract

Purpose- Financial inclusion means individuals and businesses have access to useful and affordable financial products and services to deliver their needs in a responsible and sustainable way. A financial sector is measured and compared on four main features; debt is the size of financial institutions, access is the access and use of financial services by the users, efficiency is the efficiency in the provision of financial services, and stability is the stability in the provision of financial services. The purpose of this paper is to measure the level of financial inclusion of Turkey and Greece from 2000 to 2020 and compare its relationship with the economic growth and income inequality of both countries.
Methodology- The World Bank data covering the 2000-2020 period is extracted from Turkey and Greece from the world bank report. The whole financial system for both countries is defined as a combination of banks, nonbanks financial institutions, and stock exchange markets. The related indicators for each of the subsectors of the financial system are determined for banks, nonbanks financial institutions, and stock exchange markets. Thus, 32 indicators for banks, 6 indicators for nonbanks, and 16 indicators for stock exchange markets are determined for the financial inclusion index. All indicators are in percentages. All individual indicators are summed for the computation of subsectoral indexes and then the growth rate in each subsectoral indexes are computed. The growth rates of each subsectoral index are summed and weighted by the subsectoral asset sizes or trading volüme. Finally, the causal relationship between the financial inclusion index, Gini coefficient, Poverty Headcount ratio, and GDP per capita was examined.
Findings- The average growth rate for the financial inclusion index for the 21 years is 2,83% for Turkey and 0,97% for Greece. According to the analysis, we found that the financial inclusion index Granger-cause GDP per capita, Gini index Granger-cause financial inclusion index and there is a bidirectional relationship between the financial inclusion index and Poverty Headcount ratio for Turkey. On the other hand, there is a bidirectional relationship between GDP per capita and the financial inclusion index and a bidirectional relationship between the financial inclusion index and the Poverty Headcount ratio for Greece.
Conclusion- Financial inclusion simply means a larger size of financial institutions and a variety of financial products and services available for the use of adult individuals, businesses, and governmental agencies. Economic growth is supported and accelerated by an increase in financial inclusion. The empirical analysis supports the literature that the growth in the financial inclusion index enhances a higher growth in GDP and a much higher growth in GDP per capita for both Turkey and Greece. The project titled “Istanbul as an International Financial Center” may easily improve the level of financial inclusion in Turkey.

Keywords

Financial inclusion, economic growth, income inequality, financial indicators, Turkish and Greek financial markets

References

• Abdul Karim, Z., Nizam, R., Law, S. H., & Hassan, M. K. (2022). Does Financial Inclusiveness Affect Economic Growth? New Evidence Using a Dynamic Panel Threshold Regression. Finance Research Letters, 46, 102364. https://doi.org/10.1016/j.frl.2021.102364
• Appiah-Otoo, I., & Song, N. (2021). The Impact of Fintech on Poverty Reduction: Evidence from China. Sustainability, https://doi.org/10.3390/su13095225
• Bozkurt, I., Karakuş, R., & Yildiz, M. (2018). Spatial Determinants of Financial Inclusion over Time. Journal of International Development, 30(8), 1474–1504. https://doi.org/10.1002/jid.3376
• Chen, W., & Yuan, X. (2021). Financial inclusion in China: An overview. Frontiers of Business Research in China, 15(1), 4-15. https://doi.org/10.1186/s11782-021-00098-6
• Correa, E., & Girón, A. (2019). Financial Inclusion and Financialization: Latin American Main Trends after the Great Crisis. Journal of Economic Issues, 53(2), 496–501. https://doi.org/10.1080/00213624.2019.1594544
• Dahiya, S., & Kumar, M. (2020). Linkage between Financial Inclusion and Economic Growth: An Empirical Study of the Emerging Indian Economy. Vision, 24(2), 184–193. https://doi.org/10.1177/0972262920923891
• Danisman, G. O., & Tarazi, A. (2020). Financial inclusion and bank stability: Evidence from Europe. The European Journal of Finance, 26(18), 1842–1855. https://doi.org/10.1080/1351847X.2020.1782958
• Demirguc-Kunt, A., Klapper, L., & Singer, D. (2017). Financial Inclusion and Inclusive Growth: A Review of Recent Empirical Evidence [Working Paper]. World Bank. https://doi.org/10.1596/1813-9450-8040
• Demirguc-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. World Bank. https://doi.org/10.1596/978-1-4648-1259-0
• Dogan, E., Madaleno, M., & Taskin, D. (2022). Financial inclusion and poverty: Evidence from Turkish household survey data. Applied Economics, 54(19), 2135–2147. https://doi.org/10.1080/00036846.2021.1985076
• Ezzahid, E., & Elouaourti, Z. (2022). Financial Inclusion, Financial Frictions, and Economic Growth: Evidence from Africa. Journal of African Business, 23(3), 731–756. https://doi.org/10.1080/15228916.2021.1926856
• Ferrata, L. (2019). Digital financial inclusion – an engine for leaving no one behind. Public Sector Economics, 43(4), 445–458. https://doi.org/10.3326/pse.43.4.6
• Fouejieu, A., Sahay, R., Cihak, M., & Chen, S. (2020). Financial inclusion and inequality: A cross-country analysis. The Journal of International Trade & Economic Development, 29(8), 1018–1048. https://doi.org/10.1080/09638199.2020.1785532
• Global Financial Development Database. (n.d.). [Text/HTML]. World Bank. Retrieved September 22, 2022, from https://www.worldbank.org/en/publication/gfdr/data/global-financial-development-database
• Grohmann, A., Klühs, T., & Menkhoff, L. (2018). Does financial literacy improve financial inclusion? Cross country evidence. World Development, 111, 84–96. https://doi.org/10.1016/j.worlddev.2018.06.020
• Khan, I., Khan, I., Sayal, A., & Khan, M. Z. (2021). Does financial inclusion induce poverty, income inequality, and financial stability: Empirical evidence from the 54 African countries? Journal of Economic Studies, https://doi.org/10.1108/JES-07-2020-0317
• Mose, N., & Thomi, J. (2021). The Determinants of Financial Inclusion. Financial Internet Quarterly, 17(2), 51–58. https://doi.org/10.2478/fiqf-2021-0013
• Ozili, P. K. (2021). Financial inclusion research around the world: A review. Forum for Social Economics, 50(4), 457–479. https://doi.org/10.1080/07360932.2020.1715238
• Özparlak, G., & Özhan, A. (2021). The Impact of Financial Inclusion on Economic Growth and Income Inequality. İnsan ve Toplum Bilimleri Araştırmaları Dergisi, 10(2), 69-81. https://doi.org/10.15869/itobiad.865733
• Polloni-Silva, E., da Costa, N., Moralles, H. F., & Sacomano Neto, M. (2021). Does financial ınclusion diminish poverty and ınequality? A Panel data analysis for Latin American Countries. Social Indicators Research, 158(3), 889–925. https://doi.org/10.1007/s11205-021-02730-7
• Sawadogo, R., & Semedo, G. (2021). Financial inclusion, income inequality, and institutions in sub-Saharan Africa: Identifying cross-country inequality regimes. International Economics, 167, 15–28. https://doi.org/10.1016/j.inteco.2021.05.002
• Van, L. T.-H., Vo, A. T., Nguyen, N. T., & Vo, D. H. (2021). Financial ınclusion and economic growth: an ınternational evidence. Emerging Markets Finance and Trade, 57(1), 239–263. https://doi.org/10.1080/1540496X.2019.1697672