Abstract:
Inclusive finance has received more attention globally and grown very fast in the last few years. How does inclusive finance affect economic growth? Will its effect vary with different macroeconomic and social conditions? In this paper we conduct cross-country panel regression to answer these questions. We find from our regression that the share of enterprises whose investment funds come from banks is the only inclusive finance variable that has a significant and robust negative effect on economic growth. Taking into account the different macroeconomic and social conditions of different economies, we found that in a country with higher initial GDP per capita, more years of schooling, higher level of rule of law and a larger share of SMEs, the negative effect of inclusive finance variables on economic growth is significantly higher.
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