In this webinar, Dr Philip Mader presents his findings in a first-of-its-kind study in international development, a systematic Review of Reviews of the impacts of financial inclusion in low- and middle-income countries.
REGIONAL ECONOMIC STUDIES PROGRAMME WEBINAR
Webinar Series 2020-2021: Financial Transformation, Credit Markets and Household Debt in Southeast Asia
Monday, 12 April 2021 – ISEAS – Yusof Ishak Institute hosted a webinar on “The Impacts of Financial Inclusion: From a global review of reviews, what can we know about Southeast Asia?” which was delivered by Dr Philip Mader, Research Fellow, Business, Markets and the State Cluster, Institute of Development Studies, UK. He was joined by discussant: Dr Melissa Johnston, Postdoctoral Research Fellow, Monash University, Australia.
Dr Philip began his presentation with an introduction to financial inclusion. The definition used in the talk is Consultative Group to Assist The Poor’s (CGAP), where financial inclusion refers to the various tools available. It is used to ensure all households and businesses, regardless of income, can access financial services to improve their lives, to derive useful economic and financial activity for household, to drive poverty reduction, and to have a broader range of economic activity. Financial inclusion began with microfinance in the mid-1980s, to increased access to digital financial services starting from the 2010s. It has also been adopted at increasing speeds globally, by a coalition of government, financial institutions, development institutions, NGOs, the private sector and civil society, and is projected to be a USD 38 billion sector by 2025. Dr Philip added that compared to other regions, Southeast Asian countries have more financial services available and a higher proportion of credit in portfolios than countries with similar levels of development. He cited 3 major reasons for not using financial services: not seeing the need, not having enough money, and using a family member’s financial account. However, there are 2 main issues with financial inclusion. Firstly, there is no clear evidence of financial services boosting development. Secondly, loans made are tied to debt, not savings, and borrowers may use the money for consumption instead of financing an enterprise, so an overuse or misuse of financial services can lead to large debt.
Dr Philip explained the reasons behind doing a systematic review of reviews: that it can go beyond what current systematic reviews and meta-analyses already report, to help make sense between reviews that give different conclusions, to perform network meta-analysis, and to point out gaps in current literature. He then gave an overview of the paper “Protocol: Impact of financial inclusion in low- and middle-income countries: a systematic review of reviews”, beginning with a Theory of Change with 4 major pathways towards outcomes: Economic, Social, Gender and Behavioural. He also remarked that one limitation of the Theory of Change is that, especially for gender outcomes, it does not separate between lower-order and higher-order outcomes. Out of the 32 good review papers picked out to be relevant to the review, there were only a few that studied Southeast Asian countries. Dr Philip then summarized the findings of the systematic review. For economic outcomes, the effect of microfinance on core poverty indicators, such as incomes, assets and consumption are small and inconsistent. For gender outcomes, the effects tend to be positive, but appear to be due to non-financial programme features. For health outcomes, there is an increase in health knowledge, but no increase in good health behaviours. For social outcomes, the effects are small or negligible. For behavioural outcomes, there is no evidence of any change beyond those induced by the action of borrowing. For saving opportunities, there are fairly small but consistently positive outcomes, but there is no effective attitude or behaviour change, and they tend not to invest in other enterprises, nor lead to higher-order or macroeconomic outcomes. Among the studies, there is none studying microinsurance or other areas of financial inclusion outside of microfinance. Dr Philip highlighted that this was the first review of reviews in international development, and moving forward, a theory-based review is essential to differentiate lower-level, or intermediate, outcomes and higher-level, or ultimate, outcomes. He mentioned that it is difficult to access the quality of studies, and the systematic review may have missed out some studies when they were sieving out studies in their quality review step, and also commented that it is essential for authors of primary studies to engage more critically on study quality and ensure more detailed reporting. There are also gaps in evidence, in areas such as impacts on access to services and amenities, macroeconomic effects, long-term effects of financial inclusion, heterogeneity effects arising from other factors, effects of microinsurance products, and effects of digital financial services. In summary, Dr Philip concluded that we shouldn’t be pushing for financial inclusion in every country yet, as there are vexing questions that remain: How should we regulate credit levels? Are there macro-level evidence in promoting development through financial inclusion? Are there ways to collect higher-quality evidence for the effects of financial inclusion?
The webinar was then handed over to Dr Melissa. She shared her comments on the findings, mentioning that the Theory of Change is helpful, and indicates the pathways that financial inclusion can bring positive outcomes. Dr Melissa also added that RORs are helpful for students and policy makers to understand the breadth and gaps of current literature, and also the cause-effect relationships between outcomes and the parts of the program they arise from, such as social and gender benefits mainly coming from the non-financial aspects of microfinance programs. Dr Melissa also asked questions that should be further explored: Who benefits from microfinance and how? Does this review lead to new tools to study effects and pitfalls? What should be the way froward, more RCTs, or more narrative studies?
The webinar concluded with Dr Philip and Dr Melissa answering questions posed by the audience. Some of the questions included whether the Theory of Change should include other pathways or factors, such as environmental outcomes and ability to manage financial crises, and on whether financial literacy can improve the outcomes of financial inclusion, and what policy makers can do to make the system work better in different contexts, such as in Southeast Asian countries.