Financial Inclusion in Asia (eBook)

Dr Sasidaran Gopalan is a Research Fellow at the Asia Competitiveness Institute at the Lee Kuan Yew School of Public Policy, National University of Singapore. Prior to this, he was a Post-Doctoral Fellow at the Institute for Emerging Market Studies at the Hong Kong University of Science and Technology (HKUST) and the HKUST Jockey Club Institute for Advanced Study. Dr Tomoo Kikuchi is a Senior Research Fellow at Centre on Asia and Globalisation (CAG) at the Lee Kuan Yew School of Public Policy (LKYSPP), National University of Singapore (NUS), Singapore. His research interests include: economic growth and development, international trade and investment, asset price bubbles and political economy.

Preface and Introduction 6
Part I—Measurement and Determinants 8
Part II—Financial Inclusion: Importance and Implications 9
Part III—Financial Inclusion in Asia: Country Experiences 10
Acknowledgments 12
Contents 14
About the Contributors 16
About the Editors 20
List of Figures 22
List of Tables 26
Part I: Measurement and Determinants 28
1: Measuring Financial Inclusion for Asian Economies 29
Introduction 29
Defining and Measuring Financial Inclusion: A Brief Review 31
Index of Financial Inclusion (IFI) 36
Methodology 36
Index of Financial Inclusion for Asian Economies 41
Banking Penetration (Dimension 1) 43
Availability of Banking Services (Dimension 2) 43
Usage (Dimension 3) 45
Choice of Mi and mi for Dimension Indexes 46
Weights Assigned to the Dimensions 47
IFI for Asian Countries, 2004–2013 48
Countries by IFI Categories 51
IFI by Income Categories 52
IFI by Regional Grouping 55
IFI Level and Features of Banking Sector 55
Conclusion 58
References 59
2: Determinants of Financial Inclusion in Asia 61
Introduction 61
Data 63
Indicators of Financial Inclusion 64
Determinants of Financial Inclusion 69
Methodology 69
Determinants of Financial Inclusion Indicators 72
Conclusion 81
References 82
Part II: Financial Inclusion: Importance and Implications 84
3: Does Financial Inclusion Reduce Poverty and Income Inequality in Developing Asia? 85
Introduction 85
Related Literature 88
Financial Inclusion Indicator 91
Empirical Methodology and Data Sources 98
Empirical Results 103
Summary and Policy Implications 114
References 116
4: Financial Inclusion and Monetary Policy in Emerging Asia 117
Introduction 118
Measuring Financial Inclusion in Emerging Asia 122
Financial Inclusion and Monetary Policy: Some Theoretical Arguments 128
Empirical Evidence on Interest Rate Sensitivity 131
Financial Inclusion and Monetary Policy Targets 137
Conclusion 147
References 148
Part III: Financial Inclusion in Asia: Country Experiences 152
5: Financial Inclusion in Indonesia: Moving Towards a Digital Payment System 153
Introduction 153
Current State of Financial Inclusion in Indonesia 155
How to Measure Financial Inclusion? 155
Indonesia’s Exposure to Financial Services 158
Financial Services Among the Poor and Vulnerable 164
Promoting Financial Services to the Poor and Vulnerable 168
G-to-P Payment for Financial Inclusion 168
Microcredit Programmes for the Poor 171
Models for Financial Inclusion 174
Initiatives: Saving and Credit Products 174
Greater Inclusion Through the Payment System 180
Mobile Money for G2P Transfer 184
Indonesia: Moving Towards a Digital Payment System 186
National Strategies 186
Adopted Model for Indonesia 192
Branchless Banking with a Digital Payment System 195
Regulatory Environment 195
Jump Start the Model 199
Challenges and Way Forward 203
Avoiding Inactive/Dormant Accounts 203
From Payments to Other Services 204
Conclusion 204
References 205
6: Financial Inclusion in Sri Lanka: Current Status and Issues 209
Introduction 209
Financial Sector in Sri Lanka 210
Formal Financial Institutions 211
Semiformal Financial Institutions 213
Co-operatives 213
NGOs and Companies Providing Microfinance 214
Samurdhi/Divineguma Banks 215
Geographical Coverage of Financial Institutions 215
Financial Inclusion: Where Does Sri Lanka Stand Within the Asian Region? 216
Financial Inclusion: A Household-Level Analysis 218
Financial Inclusion in Sri Lanka: Issues and Challenges 224
Conclusions 229
References 229
7: Microfinance and Financial Inclusion in India 231
Introduction 231
Microfinance in India Today: A Snapshot 233
Microfinance in India: A Brief History 238
1950–1970 (Background) 238
1970–1990 (Genesis) 239
1990–2010 (The Take-Off) 244
2010–2011 (Andhra Pradesh Crisis) 252
2011–2015 (The Slow Rebound) 261
A Credit Bureau 262
Drafting of a New Bill 262
Mor Committee Recommendations for Policy 265
Bandhan Gets Banking Licence 268
Recovery of the Sector 268
Establishment of the Micro Units Development and Refinance Agency Bank 271
Conclusion 272
References 275
Summary and Conclusions 279
Index 282