DOES ECONOMIC POLICY UNCERTAINTY REDUCE FINANCIAL INCLUSION?

  • Peterson K Ozili Central Bank of Nigeria, Abuja, Nigeria

Abstract

This study investigates whether the level of economic policy uncertainty (EPU) would reduce the level of financial inclusion. It was predicted that a high level of EPU could have a negative effect on the level of financial inclusion. It was argued that a high level of EPU would discourage financial institutions from providing basic financial services to low end customers and unbanked adults, and this would lead to a decrease in the level of financial inclusion. Using a sample of 22 countries, the study found that the level of EPU did not have a significant impact on financial inclusion. None of the nine indicators of financial inclusion were found to have a significant direct relationship with EPU. However, there was some evidence that the combined effect of a high level of EPU and high nonperforming loans could reduce financial inclusion, particularly through bank branch contraction and a reduction in the use of electronic payments. Furthermore, the use of formal accounts and credit cards would increase in times of high credit supply and when there was a high level of EPU.


JEL Classification: D14, D18, G21, G28.

Published
2021-12-02
How to Cite
OZILI, Peterson K. DOES ECONOMIC POLICY UNCERTAINTY REDUCE FINANCIAL INCLUSION?. International Journal of Banking and Finance, [S.l.], v. 17, n. 2, p. 53-80, dec. 2021. ISSN 2590-423X. Available at: <http://e-journal.uum.edu.my/index.php/ijbf/article/view/ijbf2022.17.1.3>. Date accessed: 19 jan. 2022. doi: https://doi.org/10.32890/ijbf2022.17.1.3.