Financial Inclusion and Sustainable Growth in Egypt
CitationNada, Rania H. 2020. Financial Inclusion and Sustainable Growth in Egypt. Master's thesis, Harvard Extension School.
Financial Inclusion has recently emerged as a strategic priority to the governmental agenda in Egypt. Financial inclusion has long been associated with poverty reduction, reduced income inequalities and economic growth in emerging markets. Since economic growth alone is not enough of an indicator of the sustainable development of a country, this thesis attempts to investigate whether financial inclusion is associated with sustainable economic, social and environment growth in Egypt. Two main research questions were addressed in this study: Is financial inclusion in Egypt a driver towards sustainable growth? What can Egypt learn from other markets with regards to driving financial inclusion? To assess the role of financial inclusion on social inclusion and poverty reduction in Egypt, a composite index of sustainable development was constructed using proxy indicators for economic growth, social efficiency and environmental performance. Four predictor variables of financial inclusion were tested: average household deposits per capita, average household loans per capita, number of ATMs and number of commercial bank branches per 100,000 adults. A multiple regression model was developed using financial inclusion indicators and the sustainable development composite index for the years 2004-2017.
Results showed that there is a strong correlation between financial inclusion and sustainable development in Egypt. With an R-Square of 0.99, a statistically significant correlation was observed between the proxies for financial inclusion and composite index of economic growth, social development and environmental performance. Strong associations were also seen between the financial inclusion proxies and the different separate components of the composite index.
With only 33% of the adult population having access to formal financial services in Egypt, the opportunity to improve the overall well-being of society is monumental. Four main recommendations can be made based on this research to help policymakers in their quest to drive financial inclusion in Egypt and thereby sustainable development: 1) continue to develop and improve the legal and regulatory framework to facilitate the accessibility of financial services for the lower income portions of the population that live in remote and rural areas, 2) improve the market infrastructure by reducing transaction costs and enhancing the convenience of payments channels, 3) mandate the establishment of financial literacy programs either through financial institutions or other intermediaries, and 4) encourage financial and non-financial institutions to invest in financial technology solutions.
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