Financial Inclusion and Global Regulatory Standards: An Empirical Study Across Developing Economies

This paper assesses to what extent differences in the adoption of post-crisis global regulatory standards can explain cross-country variation in financial inclusion. It enquires into whether implementation of global regulatory standards hampered financial inclusion or helped it. It also evaluates whether national regulators in developing countries have been able to apply international regulatory recommendations in a proportionate manner. The paper finds that international recommendations related to information disclosure have a positive impact on financial inclusion. It states that global standards regarding macro-prudential regulation and capital adequacy impair financial inclusion initiatives. The findings of the paper can be used to inform the coordination agenda on international financial regulation that can meet the challenge of balancing inclusion, integrity, and stability of the financial sector. The paper covers the following sections in detail:

• Concept of financial inclusion and its operationalization in empirical indices;
• Mapping of countries’ performance in terms of financial inclusion;
• Relationship between post-crisis global regulatory recommendations and financial inclusion;
• Alternative mechanisms linking various aspects of global regulatory standards and financial inclusion;
• Regression analyses and discussion on empirical results;
• Conclusion and suggestions for international regulation policy that supports inclusive financing.