Microfinance, Financial Inclusion and Financial Development: An Empirical Investigation with an International Perspective

How does microfinance promote financial inclusion and financial development?
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The fundamental question that this research aims to answer is: how does microfinance promote financial inclusion and financial development? The answer shall be achieved through the following objectives: to illustrate the link or relationship between microfinance and financial inclusion; to show empirically how microfinance influences financial inclusion; and lastly to identify the influence and relationship of microfinance access and financial inclusion to financial development.

The conjectures of the study shall be tested from a set of international data on the microfinance industry and the findings verified for the Philippine case. Four points can be inferred:

  1. Microfinance outreach has a significant relationship to financial inclusion.
  2. Financial inclusion has a significant positive relationship to financial development.
  3. Other indicators such as capital access, capital depth, size and gross domestic product contribute to an improvement in financial development.
  4. Total loans outstanding, number of active borrowers and portfolio at risk likewise positively and significantly affect financial development in the Philippines. Group lending mitigates the high level of risk inherent among micro-borrowers, making microfinance institutions capable of contributing to a country’s financial development.

About this Publication

By Dacanay, J., Nito, B. , Buensuceso, P.