Relative impact of digital and traditional financial inclusion on financial resilience: Evidence from 13 emerging countries

Abstract

We aim to understand the relative impact of traditional financial inclusion (FI) and digital financial inclusion (DFI) on perceived financial resilience (FR). We use Global Findex data for the years 2014 and 2021. Our sample includes 33933 individuals from 13 emerging economies. FI indicators include bank account ownership, saving, borrowing, payments and receipts. DFI indicators include digital borrowing, receipts and payments. Socio-economic and demographic factors such as age, gender, education and income, and informal financial activities are included as control variables. To address endogeneity issues, we include instrumental variables for each FI and DFI indicator. Individuals from Argentina, Brazil, China, Russia, South Africa and Thailand report higher levels of FI and DFI, while those from Egypt, India, Mexico and the Philippines report low levels. Estimated coefficients from bi-probit models indicate that “savings” had the largest positive impact on FR. Two FI indicators “bank account ownership” and “making payments”, and one DFI indicator “digital payments” had smaller and similar effect sizes. Digital borrowing had a small effect while digital receipts had no effect on FR. Our results indicate that having access to savings plays a larger role in improving individual financial resilience compared to other indicators. Policy implications are discussed.