TITLE:
The Impact of Financial Inclusion on Income Inequality
AUTHORS:
Mostafa Seifelyazal, Ashraf Salaheldin, Marwa Assem
KEYWORDS:
Financial Inclusion Index, MENA Region Countries, Income Inequality, Principal Component Analysis, System Generalized Method of Moments
JOURNAL NAME:
Open Journal of Social Sciences,
Vol.11 No.6,
June
28,
2023
ABSTRACT: All around the world, the value of an inclusive financial system is prioritized.
Since most of the Middle East and North Africa (MENA) region’s governments
lacked sufficient formal financial services and the majority of their
populations lacked access to conventional bank accounts, the issue of financial
exclusion became increasingly important. Financial inclusion benefits not only
individuals and families but also entire communities as a whole and can
stimulate the economy. This study’s objective is to evaluate the impact of
financial inclusion on MENA region’s income inequality. The aim of this study
is to investigate the impact of financial inclusion on the income inequality of MENA region countries. To achieve this aim, a
three-dimension Financial Inclusion Index (FII) was created using
Principal Component Analysis (PCA) to measure each country’s level of financial
inclusion. These dimensions are access, usage, and quality of financial
services. Data was collected from 18 MENA (Middle East and North Africa) region
countries using a sample period from 2004 to 2019. Based on a 2-step
Generalized Method of Moments (GMM) system, the results showed that an increase
in the level of financial inclusion leads to the decrease of MENA region
countries’ income inequality.