Chehayeb, Rabab Jabe ; Tahe , Hanadi
A icle
The ela ionship be ween inancial inclusion and economic
g ow h: Empi ical s udy om MENA coun ies
Global Business & Finance Re iew (GBFR)
P o ided in Coope a ion wi h:
People & Global Business Associa ion (P&GBA), Seoul
Sugges ed Ci a ion: Chehayeb, Rabab Jabe ; Tahe , Hanadi (2024) : The ela ionship be ween inancial
inclusion and economic g ow h: Empi ical s udy om MENA coun ies, Global Business & Finance
Re iew (GBFR), ISSN 2384-1648, People & Global Business Associa ion (P&GBA), Seoul, Vol. 29, Iss. 7,
pp. 153-167,
h ps://doi.o g/10.17549/gb .2024.29.7.153
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Recei ed: Ap . 29, 2024; Re ised: May. 30, 2024; Accep ed: Jun. 14, 2024
† Co esponding au ho : Rabab Jabe Chehayeb
E-mail: hj204@s uden .bau.edu.lb
I. In oduc ion
Financial inclusion is a b oad concep which can
be de ined in many ways. Financial inclusion implica es
easy access o use ul inancial se ices a an inexpensi e
cos , leading o he inancial s abili y o an economy.
GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 7 (AUGUST 2024), 153-167
pISSN 1088-6931 / eISSN 2384-1648∣H ps://doi.o g/10.17549/gb .2024.29.7.153
ⓒ 2024 People and Global Business Associa ion
GLOBAL BUSINESS & FINANCE REVIEW
www.gb jou nal.o g
o inancial sus ainabili y and people-cen e ed global business1)
The Rela ionship be ween Financial Inclusion and Economic G ow
h
Empi ical S udy om MENA Coun ies
Rabab Jabe Chehayeba†, Hanadi Tahe b
aPh.D. Candida e, Depa men o Economics, Facul y o Business Adminis a ion, Bei u A ab Uni e si y, Bei u , Lebanon
bPh.D., Ac ing Head o Economics Depa men , Associa e P o esso , Facul y o Business Adminis a ion, Bei u A ab Uni e si y, Bei u ,
L
ebano
n
A
B S T R A C T
Pu pose: The ela ionship be ween inancial inclusion and economic g ow h is an in iguing opic ha is gene a ing
ex ensi e a en ion among esea che s and me i s comp ehensi e in es iga ion. This pape aims o empi ically explo e
his ela ionship using panel da a o 13 Middle Eas e n and No h A ican coun ies spanning he pe iod 2004-2020.
The mul idimensional index o inancial inclusion (encompassing access, usage, and dep h) de eloped by Chehayeb
(2024) using a new echnique is u ilized o gene a e comp ehensi e esul s ac oss coun ies in eme ging economies.
Design/me hodology/app oach: An Au o eg essi e Dis ibu ed Lag (ARDL) eg ession model is applied o es
o co-in eg a ion. Vec o Au o-Reg ession (VAR) models and G ange causali y es s a e employed o in es iga e
he main esea ch ques ions.
Findings: The pape epo s an insigni ican impac o inancial inclusion on economic g ow h, aligning wi h he
ealis pe spec i e o a ew s udies ound in he li e a u e - as opposed o he posi i is pe spec i e o mos schola s.
The esul s ob ained om using he new inancial inclusion index highligh he disc epancies and con lic ing esul s
among exis ing s udies using mul iple p oxies o inancial inclusion. Howe e , empi ical esul s sugges ha he e
is a unidi ec ional G ange causali y om economic g ow h o inancial inclusion. Findings also e eal he posi i e
impac o economic g ow h on he access and usage dimensions o inancial inclusion, whe eas school en ollmen ,
ade openness, and in la ion do no appea o be signi ican ly ela ed o inancial inclusion.
Resea ch limi a ions/implica ions: This s udy is limi ed o he banking ins i u ions in eme ging economies. The
s udy ecommends ha policymake s and cen al bank go e no s in his egion u ilize he g ow h o he economy
o build an e icien and s ong inancial sys em a o ing disad an aged indi iduals. Fu u e s udies on his opic
can p o ide clea e insigh s wi h esea ch inclusi e o eligion le els, poli ical issues, and co up ion.
O iginali y/ alue: This s udy con ibu es o he exis ing li e a u e by using a new measu emen o inancial in-
clusion in s udying he ela ionship be ween inancial inclusion and economic g ow h.
Keywo ds: ARDL, Economic g ow h, Financial inclusion index, Middle Eas and No h A ica, VAR models
ⓒ
Copy igh : The Au ho (s). This is an Open Access jou nal dis ibu ed unde he e ms o he C ea i e Commons A ibu ion
Non-Comme cial License (h ps://c ea i ecommons.o g/licenses/by-nc/4.0/) which pe mi s un es ic ed non-comme cial use, dis ibu ion
,
and ep oduc ion in any medium, p o ided he o iginal wo k is p ope ly ci ed.
GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 7 (AUGUST 2024), 153-167
154
Se e al schola s ha e de ined inancial inclusion based
on ea u es ha indica e a wide access o inancial
se ices. Bhaska (2013) s a es ha inancial inclusion
is he wo ldwide access o an a o dable and unlimi ed
a ie y o inancial p oduc s. I is also de ined by
he Wo ld Bank (2023)
1)
as he access o use ul and
a o dable inancial p oduc s and se ices ha mee
consume s’ and businesses’ needs being deli e ed
in a esponsible and sus ainable way. Schumpe e
(1911) a gues ha inance s imula es g ow h, and
ha inancial se ices and inancial educa ion can
boos capi al o ma ion, hus s imula ing in es men .
Lusa di and Mi chell (2014) sugges ha endogenized
inancial knowledge has signi ican implica ions on
wel a e. Fu he mo e, Kodan and Chhika a (2013)
emphasize he ole o policymake s a ound he globe
o emo e egional imbalances, and he e o e, each
he op imal and sus ainable le el o inancial inclusion
leading o inclusi e economic g ow h.
In ecen decades, inancial inclusion has been
a policy goal in many eme ging economies, as
encou aged by he Wo ld Bank and he G20
2)
.
Financial inclusion is desi able because a highly
inclusi e inancial sys em p omo es sa ings, loans,
and isk managemen solu ions among en ep eneu s
and needy popula ions. The e o e, educa ing and
b idging he gap be ween he inancial sec o and
unbanked popula ions- hose who nei he ha e bank
accoun s no use banking se ices- a e needed now
mo e han e e . Howe e , de elopmen suppo e s
ha e no ag eed on a conclusion ega ding he impac
o inancial inclusion on mac oeconomic indica o s.
This c ea ed an inc eased in e es among schola s
o in es iga e he ela ionship be ween inancial
inclusion and economic g ow h.
Resea ch s udies in es iga ing he ela ionship
be ween inancial inclusion and economic g ow h
ha e inc eased o e he yea s. P io o 2017, e y
li le esea ch ackling his subjec is ound in li e a u e,
be ween 2000 and 2022 he e a e a ew s udies ha
1) Financial Inclusion O e iew (wo ldbank.o g) isi ed on 12/15/
2023
2) G20 is a g oup o so e eign coun ies wo ks on global issues
including in e na ional inancial s abili y.
ocus on a single egion (Ozili e al, 2023). Some
o he s udies ackling his subjec ha e adop ed
ime-se ies da a (Sha ma, 2016 and Migap e al.,
2015). The inancial inclusion indices ound in
li e a u e ha e no cap u ed he ull a ia ions, leading
o di e en esul s ac oss s udies. Se e al esea ch
s udies show a posi i e ela ionship be ween inancial
inclusion and economic g ow h, whe eas o he s udies
documen a nega i e ela ionship. Ye , none o hese
esea ch s udies use he new mul idimensional inancial
inclusion index (
FINCI
) de eloped by Chehayeb
(2024). Following Sa ma’s (2008) app oach,
FINCI
has p o ed o be use ul in measu ing inancial inclusion
le els o coun ies o e he yea s due o i s compa abili y
and simplici y. The e o e, he ongoing heo e ical
deba e abou he ypes o ela ionships be ween
inancial inclusion and g ow h has shown ha he
s udies a e inadequa e as esea che s ha e no ag eed
on he ype o causali y be ween he wo a iables
(Ozili e al, 2023).
The e o e, his pape aims o close he esea ch
gap iden i ied be ween he heo e ical and he la es
implica ions o he ongoing deba e obse ed in
li e a u e on whe he a causal ela ionship exis s
be ween inancial inclusion and economic g ow h,
wi h a signi ican con ibu ion o he exis ing esea ch,
speci ically in he MENA egion. Unlike p e ious
s udies ha use indi idual inancial inclusion indica o s
o o he indices ha ailed o cap u e signi ican
dimensions, his pape u ilizes a new index o inancial
inclusion (
FINCI
) de eloped by (Chehayeb, 2024)
applied on 13 chosen coun ies om he MENA egion:
Alge ia, Djibou i, Egyp , Jo dan, Kuwai , Lebanon,
Libya, Mo occo, Oman, Qa a , Saudi A abia, Tunisia,
and Uni ed A ab Emi a es o e 2004-2020. This s udy
con ibu es o policy discussions abou he ole o
policymake s and cen al bank go e no s in imp o ing
he wel a e o he economies.
To he bes o my knowledge, his subjec has
no been s udied in any ecen panel analysis in he
MENA egion u ilizing
FINCI.
Fu he mo e, his
s udy examines each dimension o he inancial
inclusion index (access, usage, and dep h) o explo e
i s indi idual in e linkage causal e ec on economic
Rabab Jabe Chehayeb, Hanadi Tahe
155
g ow h. This new composi e inancial inclusion index
(
FINCI
), which is based on Sa ma (2012) and UNDP
me hodology, be e cap u es he dimensions o inancial
inclusion igno ed in p e ious s udies (Chehayeb,
2024). Also, he choice o he coun ies has been
based on he simila i ies in hei economies’ cul u es,
languages, poli ics and geog aphic loca ions as well
as he a ailabili y o da a and app op ia e li e a u e
o suppo he a gumen s. The emainde o his
esea ch is laid ou as ollows: Sec ion 2 summa izes
he li e a u e e iew. Sec ion 3 explains he esea ch
me hodology. Sec ion 4 p esen s and analyses he
empi ical esul s. Sec ion 5 concludes.
II. Li e a u e Re iew
The li e a u e e iewed on he d i ing o ces o
economic g ow h shows ha labo , physical capi al,
le el o echnology and na u al esou ces cons i u e
he ac o s o p oduc ion ha de e mine economic
g ow h. The economic g ow h analysis was i s
no iceable by Solow (1956), whose g ow h model
sugges s ha he size o capi al s ock depends
p ima ily on he sa ings a e o he economy, which
would de e mine i s le el o ou pu . In addi ion,
de eloping coun ies can bene i much mo e om
inc easing hei sa ings a es o s imula e hei
economic g ow h. Liu and Guo (2002) sugges ha
de eloping coun ies will enhance hei GDP by
encou aging he sa ings in hei coun ies. This can
be made possible h ough mobilizing he c edi able
capi al a ailable o inance agg ega e in es men , hus
inc easing he coun ies p oduc i i y le el (S e n,
1991). Cobb e al. (1995) emphasizes he impo ance
o GDP and GDP pe capi a o measu ing he
economic wel a e o a pa icula coun y, claiming
ha i is a p ima y indica o ha socie ies should
wo k on o enhance hei social wel a e. Se e al esea ch
s udies adop GDP pe capi a as a p oxy o g ow h
a e, such as Kim e al. (2018) and Van e al. (2021).
This allows he popula ion size o be aken in o
conside a ion, he e o e educing a possible
he e ogenei y p oblem.
The heo y o inance and g ow h emphasizes he
impo ance o inancial ins i u ions in imp o ing
inancing condi ions ha would e lec on in es men
and p oduc i i y le els, he e o e in luencing economic
ou pu and g ow h (Gu ley and Shaw (1955), McKinnon
(1973) and Le ine (2005)). The heo y a gues ha
inancial ins i u ions be e alloca e c edi owa d
p oduc i i y and g ow h (Le ine, 2005). Ozili (2020a)
in his heo e ical s udy abou " he sys em heo y o
inancial inclusion" a gues ha inancial inclusion
can be a ained h ough se e al pa s o he economic
sec o , such as h ough o mal inancial ins i u ions,
esul ing in ou comes wi h a posi i e e ec on he
economic sys em.
Se e al empi ical s udies show a posi i e
ela ionship be ween inancial inclusion and economic
g ow h. A s udy by Sahay e al. (2015) e eals a
posi i e co ela ion be ween inancial access (ATMs
o bank b anch a ailabili y) and inancial dep h
( inancial se ices’ olume) wi h economic g ow h.
Sa ma (2008), Aduda and Kalunda (2012), Ha iha an
and Ma k anne (2012), and Onaolapo (2015) ag ee
ha inancial inclusion boos s economic ac i i ies
in he gi en economies. They use a ious banking
indica o s o inancial inclusion assessmen , including
bank b anches, deposi s and c edi , and Au oma ed Telle
Machines, as well as a ious app oaches including
O dina y Leas Squa e (OLS), Fully Modi ied Leas
Squa e (FMOLS), Vec o Au o-Reg ession (VAR) and
Au o eg essi e Dis ibu ed Lag (ARDL). As such,
simila esul s we e achie ed by Sha ma (2016), who
sugges s a posi i e in e linkage ela ionship be ween
inancial inclusion’s dimensions and economic g ow h.
Musembi and Chun (2020) e eal he posi i e impac
o inancial inclusion on u u e economic g ow h while
Mus a a and Rahman (2015) ind ha bank-based
inancial inclusion has a posi i e impac on G oss S a e
P oduc g ow h. Howe e , Ha iha an and Ma k anne
(2012) conclude ha his ela ionship is s ill no well-
co e ed by empi ical li e a u e al hough hey sugges
a causal associa ion unning om inancial inclusion
o economic g ow h, speci ically boos ing p oduc i i y
GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 7 (AUGUST 2024), 153-167
156
and he accumula ion o capi al o a coun y.
Using a panel causali y es o s udy he bi-di ec ional
causali y be ween inancial inclusion and economic
g ow h, Se hi and Acha ya (2018) ind ha inancial
inclusion spu s economic g ow h. Using panel
co-in eg a ion, hei s udy e eals a posi i e long- un
co ela ion be ween inancial inclusion and economic
g ow h. Cen al banks play a c ucial ole in highligh ing
he impo ance o an inclusi e inancial sys em and
es ablishing adequa e poli ical secu i y p ocedu es
o he g ow h o an economy. This helps s imula e
public con idence o inc ease sa ings deposi s and
accoun c ea ions wi hin he inancial sys em
(Babajide e al., 2015) and (Lenka and Sha ma, 2017).
Some s udies show ha inancial inclusion may
ha e a nega i e impac on economic de elopmen .
A s udy by Ba ajas e al. (2013) e eals ha "i is
no necessa y ha all economies exhibi a posi i e
g ow h- inance nexus, and i may no lead o a posi i e
inance-g ow h nexus." The e o e, some o he ew
li e a u es app o e he nega i e e ec o inancial
inclusion on g ow h, ailing o p o e a posi i e impac .
Rega ding inancial inclusion in he Middle Eas and
No h A ica (MENA) egion, Pea ce (2011) emphasizes
i s impo ance in compe i i eness, employmen c ea ion,
and po e y educ ion, ecommending p io i izing i
as an objec i e and a policy ocus o inancial
egula o s ac oss he egion. Pea ce a gues ha despi e
he e icien inancial sys ems in place, i is s ill unable
o each low income and disad an aged g oups.
Meh o a and Ye man (2015) a gue ha inancial
inclusion may ail o p o e a posi i e impac on
all economies, poin ing ou he possible nega i e
e ec s o c edi g ow h and un egula ed inancial
sec o bodies on inancial s abili y. This leads o
inancial c ises and de icien economic s uc u es,
which in u n would signi ican ly impac he co ela ion
be ween inance and g ow h. A s udy pe o med by
Sulong and Baka (2018) a gue ha weak o low
access o inancial esou ces is he main eason s udies
ails o p o e a posi i e impac o inancial inclusion
on g ow h.
III. Resea ch Me hodology
The exis ing li e a u e has helped in iden i ying
he app op ia e me hodology combining C oss-sec ion
and Time-Se ies da a (unbalanced panel da a), con aining
obse a ions on 13 selec ed MENA coun ies (Alge ia,
Djibou i, Egyp , Jo dan, Kuwai , Lebanon, Libya,
Mo occo, Oman, Qa a , Saudi A abia, Tunisia, and
he Uni ed A ab Emi a es) using c oss sec ional da a
ac oss he pe iod 2004-2020. This s udy uses ime
se ies and c oss-coun y da a, he lag e ec o
a iables such as he GDP and o he mac oeconomic
a iables is o be deal wi h as some o hese a iables
may be subs an ially a ec ed by hei p e ious yea ’s
alues. Thus, i is essen ial o include he lag e ec
and causali y in he econome ic model de eloped
in his pape o a ain he desi ed ou come.
This esea ch s udy u ilizes Chehayeb’s (2024)
Index (
FINCI
) o measu ing inancial inclusion.
Using his esea ch ool wi h MENA coun ies will
con ibu e academic bene i o se e al easons. Fi s ,
i is a new mul idimensional index which has no
been used in simila esea ch hypo heses. Second,
FINCI
’s me hodology, which ollows Sa ma's (2012)
app oach and o he indices including HDI, has p o en
o be use ul in measu ing he inancial inclusion
e ol emen o each coun y o e he yea s. Thi d,
i is compa able ac oss coun ies. Las ly, including
he dep h dimension as a new sub-dimension measu ed
by he a iables "p i a e c edi by deposi money
banks and o he inancial ins i u ions o GDP (%),
inancial sys em deposi s o GDP (%), and emi ance
in lows o GDP (%)," has e ealed a signi ican e ec
on he esul s. I is wo h men ioning ha Sa ma
(2012) uses h ee dimensions o measu e inancial
inclusion: banking pene a ion, a ailabili y o inancial
se ices, and usage o he pe iod 2004-2010.
The ollowing esea ch hypo heses a e de eloped:
H
01
:
A causal associa ion exis s be ween inancial
inclusion and economic g ow h.
H
02
:
A causal associa ion exis s be ween he access
dimension and economic g ow h.
H
03
:
A causal associa ion exis s be ween he usage
Rabab Jabe Chehayeb, Hanadi Tahe
157
dimension and economic g ow h.
H
04
:
A causal associa ion exis s be ween he dep h
dimension and economic g ow h.
S a iona i y in he ime-se ies is checked using
a uni oo es . Da a migh expe ience a non-s a iona y
d i e o se ies, which would lead o spu ious
eg ession. The mos popula es o de e mining
whe he he se ies is s a iona y o non-s a iona y is
he Augmen ed Dickey-Fulle (ADF) (Dickey and
Fulle , 1981), which is applied in his s udy o check
o s a iona i y (Hill e al., 2018).
The econome ic me hods used in his esea ch
s udy include Au o eg essi e Dis ibu ed Lag (ARDL)
eg ession model, simila o he s udy by Se hi and
Se hy (2018), o es o coin eg a ion o explo e he
long- un co ela ion be ween a iables wi h he help
o bound es (F-S a is ic) and Johansen Sys em
Coin eg a ion es s. The ARDL model is bene icial
in cap u ing dynamic e ec s om lagged x’s and
lagged y’s and helps o elimina e se ial co ela ion
in he e o s i enough lags o y’s and x’s a e included.
Each dependen a iable is eg essed on wha i was
in he p e ious ime pe iods (lagged alues o he
dependen a iable y) as well as on he explana o y
a iables wi h lagged alues (an explana o y a iable
x, and i s lags). Fo ins ance, a change in a inancial
inclusion alue now may ha e an impac on economic
g ow h now and in u u e pe iods as well as on inancial
inclusion le els in he u u e; i akes ime o he
e ec o inancial inclusion o ully wo k i s way
h ough he economy. The lowes Akaike in o ma ion
c i e ion (AIC) alue is used o iden i y he ideal lag
leng h. Deciding on he empi ical lag leng h is c ucial
because excessi e lags can c ea e a loss o deg ees
o eedom, s a is ically insigni ican coe icien s and
mul icollinea i y while insu icien lags can esul
in speci ica ion e o s (Hill e al., 2018).
Also, he un es ic ed Vec o Au o-Reg ession
(Sims, 1980) is es ima ed using O dina y Leas Squa e
(OLS) me hod o ensu e lexibili y in choosing
endogenous and exogenous a iables. The VAR
model is a gene al amewo k used o examine he
dynamic ela ionship be ween s a iona y a iables.
On he o he hand, i is used be ween a iables in
i s di e ence which a e no coin eg a ed (Hill e
al., 2018). Mo eo e , he VAR G ange causali y
es (G ange , 1988) will be used o examine he
di ec ion o causal associa ion be ween
FINCI
and
economic g ow h, as well as o es he in e linkage
be ween each o he h ee co e dimensions o
FINCI
and economic g ow h, simila ly o s udies ound in
he li e a u e such as Se hi and Acha ya (2018), Se hi
and Se hy (2018), and Kim e al. (2018). The concep
o G ange causali y is e y p ac ical and popula in
econome ic applica ions; i e e s o p edic abili y
as one o he cha ac e is ics o causal ela ions.
The a iables a e annual and ex ac ed om he
Wo ld De elopmen Indica o s/The Wo ld Bank
da abase, including he da a o he g oss domes ic
p oduc pe capi a, as well as he da a o he con ol
a iables: in la ion, ade openness and school en ollmen
a io. Whe eas da a on inancial inclusion is ob ained
om he s udy conduc ed by Chehayeb (2024) using
he alues o
FINCI.
Each o hese a iables en e s
as an endogenous a iable in one model and as an
exogenous a iable in all o he models wi h a lag.
To ill he gap o missing da a on p ima y educa ion
o Lebanon and Saudi A abia, an assumed alue
is ob ained, aking in o conside a ion bo h he li e acy
a e and he e ia y school en ollmen da a a ailable.
The ollowing models including he lag e ec s
a e p oposed:
LGDPi = β0i + β1i GDP
i -1 +β2i FINCI
i -1 + β3iXi -1
+ ɛi (1)
FINCIi = β0i + β1i FINCI
i -1+ β2i LGDPi -1 + β3iXi -1
+ ɛi (2)
Whe e
i
ep esen s he c oss-sec ion coun ies,
indica es he cu en yea ime se ies,
- 1
exhibi s
he lag ela ionship (op imal lag leng h based on he
lowes AIC alue),
β
i
s ands o he pa ame e o
he in e cep and slope coe icien , and
ɛ
i
he s ochas ic
dis u bance e m cap u ing he e ec s o he o he
missing a iables has a mean o ze o, a cons an
a iance and co a iance.
GDP
deno es eal G oss
Domes ic P oduc pe capi a; he mos common
measu e o economic g ow h is he loga i hm o GDP
GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 7 (AUGUST 2024), 153-167
158
pe capi a, as indica ed by he IMF (2010) and Wo ld
Bank (2014). The e o e, his s udy adop s eal GDP
pe capi a (GDP) as a p oxy o economic g ow h
ollowing Le ine (1999) and o he s udies such as
Kim e al., (2018), Sha ma (2016), and Van e al.
(2021).
FINCI
is a composi e index o measu ing
inancial inclusion a a ime
de eloped by Chehayeb
(2024). I consis s o h ee dimensions o banking
se ices: access, usage, and dep h.
X
i
deno es o he
mac oeconomic a iables as con ol a iables.
To explo e he ela ionship be ween inancial
inclusion and economic g ow h, he below equa ions
a e empi ically es ima ed:
FINCIi =β0i+β1iFINCIi -1+β2i LGDP
i -1+β3iINFi -1
+β4iTRADEi -1+β5iSEPi -1+ɛi (3)
LGDPi =β0i+β1i LGDP
i -1+β2iFINCIi -1+β3iINFi -1
+β4iTRADEi -1+β5iSEPi -1+ɛi (4)
Mo eo e , he below sub-models a e es ed o
he inancial inclusion dimensions, which include
access, usage, and inancial dep h o explo e he causal
e ec and s eng h o each dimension on he g ow h
o he MENA economies.
LGDPi =β0i+β1i LGDP
i -1+β2iACCESSi -1+β3iINFi -1
+β4iTRADEi -1+β5iSEPi -1+ɛi (5)
ACCESSi =β0i+β1iACCESSi -1+β2i LGDP
i -1
+β3iINFi -1+β4iTRADEi -1+β5iSEPi -1+ɛi
(6)
LGDPi =β0i+β1i LGDP
i -1+β2iUSAGEi -1+β3iINFi -1
+β4iTRADEi -1+β5iSEPi -1+ɛi (7)
USAGEi = β0i+β1iUSAGEi -1+β2i LGDP
i -1
+β3iINFi -1+β4iTRADEi -1+β5iSEPi -1+ɛi
(8)
LGDPi =β0i+β1i LGDP
i -1+β2iDEPTHi -1+β3iINFi -1
+β4iTRADEi -1+β5iSEPi -1+ɛi (9)
DEPTHi =β0i+β1iDEPTHi -1+β2i LGDP
i -1+β3iINFi -1
+β4iTRADEi -1+β5iSEPi -1+ɛi (10)
In all o he abo e equa ions,
LGDP
deno es he
loga i hm o G oss Domes ic P oduc pe capi a,
FINCI
e e s o he Financial Inclusion Index
calcula ed by Chehayeb (2024), and
INF
,
TRADE
,
and
SEP
indica e in la ion (annual %), ade openness
(% o GDP) and p ima y school en ollmen , (% g oss)
espec i ely.
ACCESS
,
USAGE
, and
DEPTH
ep esen
he h ee dimensions o
FINCI.
Mo eo e , o con ol economic g ow h, he cu en
s udy uses mac oeconomic ac o s such as in la ion
(
INF
), ade openness (
T ade
(%GDP)), and school
en ollmen a io (
SEP
, p ima y school en ollmen (%
g oss)), as omi ing signi ican a iables in a
eg ession model some imes cause biased esul s
(Guja a i, 2009). The choice o in la ion is dic a ed
by he ad e se ela ionships ound in li e a u e
be ween in la ion and economic g ow h. The s udy
conduc ed by Kablan (2010) on he Sub-Saha an
A ican coun ies e eals he des abiliza ion e ec
o in la ion on inancial de elopmen . Also, his
nega i e e ec is deduced in he s udies o Fische
(1993), Ba o (1996), Mensah e al (2012), and B uno
& Eas e ly (1998). Fische (1993) examines he
in luence o mac oeconomic ac o s on economic
g ow h, he does no only conclude a nega i e
associa ion be ween in la ion and economic g ow h
bu also inds ha in la ion leads o a educ ion in
in es men . Fu he mo e, McKinnon (1973) and
Shaw (1973) ind a nega i e ela ionship be ween
in la ion as well as ade openness wi h economic
g ow h. Kim e al. (2018) use mac oeconomic ac o s
such as in la ion, school en olmen o p ima y
educa ion, and ade, while Se hi and Acha ya (2018)
use Human Capi al Index and openness. The choice
o school en ollmen a io assumes ha educa ed
and knowledgeable consume s can make sound
inancial decisions imp o ing hei abili y o de elop
pe sonal inance skills. Lusa di and Sche esbe g
(2013) s esses ha educa ion can posi i ely in luence
he inancial beha io o households, which posi i ely
a ec s he pe o mance o he economy. In ano he
s udy, Klappe e al. (2012) a gues ha inancial
li e acy has qui e he in luence on a ange o economic
indica o s om ha ing subs an ial spending capaci y
o ha ing access o a bank accoun and bank c edi .
Dabbous and Nasse eddine (2018) s a e ha educa ion
c ea es a knowledgeable popula ion in which
indi iduals a e awa e o he a ious inancial se ices
a ailable. Finally, ade openness is chosen in line
wi h Musembi and Chun (2020) and Neaime and
Rabab Jabe Chehayeb, Hanadi Tahe
159
Gaysse (2018). T ade openness is de ined by he
Wo ld Bank as " he sum o expo s and impo s o
goods and se ices compu ed as a pe cen age o GDP."
This measu e signi ies he exposu e o an economy
o global ade, which c ea es economic g ow h.
Howe e , due o insu icien da a, some in luen ial
a iables a e excluded om he model despi e hei
impo ance o inancial inclusion, o example
co up ion le els and he quali y o egula ions, which
is also emphasized by Demi guc-kun e al. (2014
and 2018). As well as income inequali y, which is
highligh ed by Sa ma and Pais (2011) as coun ies
cha ac e ized wi h g ea e income dispa i y su e om
a lowe le el o inancial inclusion. Un o una ely,
i was no possible o include his con ol a iable in
he model due o lack o da a o he Gini index, which
se es as a p oxy o income inequali y, o he
coun ies included in he sample o he cu en s udy.
IV. Empi ical Resul s and Discussion
Table 1 p esen s a b ie desc ip i e s a is ic o
a iables (2004-2020), in which he inconsis ency
in he numbe o obse a ions owing o lack o da a.
I discloses he eno mous a ia ion in inancial inclusion
among he MENA coun ies in addi ion o he
ola ili y in he con ol a iables and GDP as indica ed
by he s anda d de ia ion alues.
The low inancial inclusion alues (Table 2) e lec
Va iables Mean Median Maximum Minimum SD Obse a ions
LGDP 9.04 8.66 11.35 6.76 1.18 221
FINCI 0.29 0.30 0.55 0.08 0.12 195
ACCESS 0.39 0.38 0.88 0.03 0.23 203
USAGE 0.27 0.25 0.49 0.06 0.10 218
DEPTH 0.21 0.21 0.43 0.00 0.10 213
INF 4.55 3.26 84.86 -4.86 7.16 221
SEP 96.45 100 125.64 41.02 15.65 202
TRADE 96.91 90.37 347.99 30.25 47.70 209
No e: LGDP deno es he na u al loga i hm o GDP pe capi a; ACCESS, USAGE and DEPTH ep esen he dimensions o FINCI; INF:
in la ion (annual %); SEP; p ima y school en ollmen (% g oss); TRADE: ade openness (% o GDP).
Table 1. Desc ip i e s a is ics o he a iables 2004-2020 es ima ed using EViews
Coun y 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Alge ia 0.1 0.09 0.09 0.1 0.1 0.11 0.11 0.1 0.1 0.11 0.13 0.14 0.14 0.15 0.15 0.15
Djibou i 0.11 0.11 0.11 0.12 0.12 0.14 0.16 0.14 0.14 0.12 0.13 0.13 0.13 0.15 0.15 0.16 0.17
Egyp 0.21 0.22 0.21 0.2 0.19 0.17 0.18 0.17 0.17 0.17 0.18 0.19 0.23 0.25 0.24 0.23 0.25
Jo dan 0.38 0.37 0.36 0.36 0.36 0.36 0.37 0.37 0.36 0.4 0.4 0.4 0.39 0.41
Kuwai 0.28 0.29 0.31 0.35 0.36 0.41 0.4 0.38 0.39 0.4 0.43 0.43 0.39 0.42 0.42
Lebanon 0.54 0.53 0.5 0.51 0.52 0.51 0.53 0.54 0.54 0.53 0.54 0.55 0.52 0.53
Libya 0.09 0.08 0.09 0.09 0.1 0.12 0.12 0.2 0.13
Mo occo 0.23 0.25 0.27 0.3 0.32 0.35 0.35 0.37 0.38 0.38 0.39 0.4 0.41 0.41 0.41 0.41 0.41
Oman 0.26 0.25 0.25 0.26 0.25 0.29 0.31 0.31 0.29 0.31 0.26
Qa a 0.28 0.31 0.31 0.32 0.32 0.37 0.38 0.35 0.39 0.35 0.38 0.36 0.39 0.41 0.38 0.4 0.46
Saudi
A abia
0.17 0.17 0.18 0.2 0.21 0.24 0.23 0.2 0.2 0.21 0.23 0.26 0.27 0.26
Tunisia 0.22 0.22 0.23 0.24 0.25 0.27 0.29 0.3 0.31 0.32 0.33 0.33 0.34 0.34 0.33 0.33 0.36
UAE 0.22 0.28 0.28 0.31 0.34 0.42 0.4 0.39 0.39 0.38 0.4 0.4 0.41 0.4 0.39 0.38 0.37
Table 2. Financial inclusion alues es ima ed by Chehayeb (2024)
GLOBAL BUSINESS & FINANCE REVIEW, Volume. 29 Issue. 7 (AUGUST 2024), 153-167
160
he weak inancial inclusion e o s in he MENA
egion. The s udy by Chehayeb (2024) emphasizes
he signi icance o inancial access o inancial
inclusion wi h ega ds o b anches, ATMs and he poin
-o -sale and emphasizes he impo ance o he usage
o inancial p oduc s and inancial dep h dimensions.
I is wo h men ioning ha a highe index alue
designa es a highe le el o inancial inclusion, and
a lowe index alue deno es a lesse le el o inancial
inclusion. The missing alues a e due o inadequa e
da a on some o he ac o s o he dimensions used
o calcula e inancial inclusion. Table 2 exhibi s
FINCI alues calcula ed by Chehayeb (2024), which
will be used in he cu en empi ical s udy.
Despi e he imp o emen in he inancial inclusion
alues as e ealed in Table 3, as he p opo ion o
low FINCI coun ies dec eased om 90.9% in 2004
o 37.5% in 2020, he high-income coun ies a e s ill
behind in hei inancial inclusion le els as no coun y
om he 13 selec ed MENA coun ies has a ained
an ex ao dina y le el o inancial inclusion (Chehayeb,
2024). I is also wo h men ioning ha coun ies a e
classi ied by he Wo ld Bank acco ding o he income
le el, hen ca ego ized using FINCI alues ollowing
Sa ma’s (2012) classi ica ion- low o alues less
han 0.3, medium o alues be ween 0.3 and 0.6,
and high o alues abo e 0.6. The below able (Table
3) summa izes he desc ip i e s a is ics o FINCI.
A. Panel Uni Roo Resul s
Be o e es ima ing he model, es ing he ime-se ies
o he exis ence o a uni oo is essen ial using
he augmen ed Dickey-Fulle (ADF) (Dickey and
Fulle , 1981), Table 4 e eals ha LGDP, FINCI,
and D1_ACCESS need o be co ec ed o become
s a iona y a i s di e ence, while D2_USAGE,
D3_DEPTH, INF, SEP, and TRADE a e ound o
be s a iona y a le els (a 5% signi icance le el),
whe e he null hypo hesis o all hese es s is
non-s a iona y. The esul s ob ained allow he use
o panel coin eg a ion ha needs a le el o 1
s
di e ence o de o in eg a ion.
B. Coin eg a ion Tes s
As all a iables a e p o ed o be s a iona y a
ei he le el o 1
s
di e ence and none a 2
nd
di e ence,
ARDL eg ession model can be applied o es o
coin eg a ion wi h he help o bound es (F-S a is ic)
and Johansen Coin eg a ion es , whe e he null
hypo hesis is "no coin eg a ion exis s." Table 5 e eals
ha F-s a is ic alues o equa ions 3,4,5,7,9,and 10
a e less han he c i ical alues o he lowe bound
I (0) and uppe bound I(1); hus, he null hypo hesis
canno be ejec ed indica ing ha he e is no p esence
o coin eg a ion and he e is no e idence o a long-
2004 2009 2015 2016 2017 2018 2019 2020
Minimum 0.09 0.08 0.13 0.13 0.15 0.15 0.15 0.17
Maximum 0.54 0.53 0.55 0.52 0.53 0.42 0.41 0.46
Mean 0.22 0.23 0.32 0.33 0.34 0.32 0.31 0.34
S anda d De ia ion 0.12 0.13 0.12 0.12 0.11 0.10 0.10 0.10
CV(SD/Mean) 0.54 0.55 0.39 0.36 0.34 0.33 0.33 0.34
#o coun ies 11 11 12 12 12 10 9 8
High FINCI coun ies 00000000
Medium FINCI coun ies 11788665
Low FINCI coun ies 10 10 544433
P opo ion o low FINCI coun ies (%) 90.9 90.9 41.7 33.3 33.3 67 33.3 37.5
Sou ce: Chehayeb (2024)
Table 3. Desc ip i e s a is ics o FINCI o he 13 selec ed coun ies o e p o ided yea s
Rabab Jabe Chehayeb, Hanadi Tahe
167
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