Submit to this Journal Review for this Journal Propose a Special Issue

Article Menu

Share Help Cite Discuss in SciProfiles

Open AccessArticle

Peer-Review Record

The Effect of Financial Inclusion and Competitiveness on Financial Stability: Why Financial Regulation Matters in Developing Countries?

J. Risk Financial Manag. 2022, 15(3), 122; https://doi.org/10.3390/jrfm15030122

by João Jungo^*

, Mara Madaleno

and Anabela Botelho

Reviewer 1: Anonymous

Reviewer 2: Anonymous

J. Risk Financial Manag. 2022, 15(3), 122; https://doi.org/10.3390/jrfm15030122

Submission received: 3 February 2022 / Revised: 24 February 2022 / Accepted: 28 February 2022 / Published: 4 March 2022

(This article belongs to the Section Economics and Finance)

Round 1

Reviewer 1 Report

Thank you for showing an interest research finding about financial inclusion. It is quite interesting paper. Here are some points to improve the manuscript:

[1] What are the common features of the selected countries, specifically in terms of financial system? For instance, countries in SSA have to have their common features as SSA countries. If the countries have different financial systems or legal systems or demographics, the current manuscript has weak approach to understand the grouped countries. Therefore, the common feature of the selected countries for SSA should be introduced and explained. Same should be done for LAC.

[2] The local specialties are important in this study. Because SSA and LAC countries were investigated and compared, the local financial systems should be compared between two groups of countries. Even if the authors indicated that there were not enough literature about LAC (i.e., line 183), LAC countries has the financial system itself. And literatures will explain what the financial systems are in LAC countries.

[3] The concern about financial technology through mobile phone should be discussed in literature review and discussion. Even in African countries, there are lots of cases of using phone for finance and banks. For instance, 2G phones were possibly utilized only for financial accessibility. In this case, the length to banks and financial institutions were adjustably explained. Same as in Latin America and Caribbean countries. There are basic financial technologies through phones were utilized to cope against the financial inclusion. Even the data did not include the data about basic financial technology through 2G phone or higher level phone, the authors should explain why and how the financial technology was logically excluded from the study. This should not be justified just by saying “it is not our research purpose.” Because the basic financial technology is absolutely the source to cope against the financial exclusion, it should be introduced and explained.

Author Response

Dear editor,

Thanks for the opportunity of considering our article for review and possible publication in the JRFM. We have answered all the queries raised by reviewers one by one and left the answers here and in the manuscript in blue to turn easier the identification of changes. The authors acknowledge the valuable comments of both the editor and reviewers and the statement has been included in the appropriate place.

Reviewer 1

Thank you for showing an interest research finding about financial inclusion. It is quite interesting paper. Here are some points to improve the manuscript:

What are the common features of the selected countries, specifically in terms of financial system? For instance, countries in SSA have to have their common features as SSA countries. If the countries have different financial systems or legal systems or demographics, the current manuscript has weak approach to understand the grouped countries. Therefore, the common feature of the selected countries for SSA should be introduced and explained. Same should be done for LAC.

Thanks for the appreciation and suggestion. Regarding this, we have included the following text in the manuscript introduction.

The selection of Sub-Saharan Africa and Latin America and Caribbean regions for our study is justified in several ways. First, although these groups of countries are located in different geographic regions, many of them have similar economic and social characteristics, namely strong heterogeneity in economic growth, excess natural resources, low levels of economic development, strong population growth, high rates of poverty, and unemployment (Jungo et al, 2021; Torre et al., 2018). Second, in both regions, a considerable number of adults remain without access to financial services and products (Demirgüç-Kunt et al, 2018; Mukherjee & Sood, 2020). Third, the economic organization system in the two regions is rather dualistic, where there is a strong interaction between the informal and the formal system (Durango-Gutiérrez et al., 2021; Fromentin, 2018; Gries et al, 2011). Finally, banks are the main financial institutions and deposits and loans are the main instruments of financial intermediation in SSA countries (Allen et al., 2014), while for LAC countries, the emergence of capital markets has made the financial system more comprehensive and complex (Durango-Gutiérrez et al., 2021; Fromentin, 2018; Gries et al., 2011; Torre et al., 2018).

The local specialties are important in this study. Because SSA and LAC countries were investigated and compared, the local financial systems should be compared between two groups of countries. Even if the authors indicated that there were not enough literature about LAC (i.e., line 183), LAC countries has the financial system itself. And literatures will explain what the financial systems are in LAC countries.

Thanks for the suggestion. Regarding this point we have added the following also to the introduction of the manuscript:

Additionally, the financial systems of SSA countries are fundamentally dependent on banks, while the financial systems of LAC countries are more extensive and complex, due to the emergence of capital markets. Besides, the levels of financial inclusion in both re-gions are still very low, with only 43% of adults in SSA countries and 55% of adults in LAC countries having a bank account.

The concern about financial technology through mobile phone should be discussed in literature review and discussion. Even in African countries, there are lots of cases of using phone for finance and banks. For instance, 2G phones were possibly utilized only for financial accessibility. In this case, the length to banks and financial institutions were adjustably explained. Same as in Latin America and Caribbean countries. There are basic financial technologies through phones were utilized to cope against the financial inclusion. Even the data did not include the data about basic financial technology through 2G phone or higher level phone, the authors should explain why and how the financial technology was logically excluded from the study. This should not be justified just by saying “it is not our research purpose.” Because the basic financial technology is absolutely the source to cope against the financial exclusion, it should be introduced and explained.

We are completely following the reviewer and with this suggestion, we have included the explanatory text:

Financial inclusion is a policy goal present on almost every agenda, especially in emerging economies and developing countries (Demirgüç-Kunt et al., 2018; Mukherjee & Sood, 2020). Access to a bank account is the main way forward to achieve financial inclusion (Demirgüc-Kunt et al., 2018). Technological innovation, specifically the use of the cell phone in the financial system has revolutionized financial access almost worldwide, reducing by about 35% the total number of adults (1.7 billion) without access to a bank account in the year 2017. In this perspective, the levels of financial inclusion in SSA coun-tries evolved from 25% in 2011, 34% in the year 2014, and 43% in the year 2017. For LAC countries, technological innovation allowed the growth of financial inclusion levels by 39%, 52%, and 55% in the years 2011, 2014, and 2017, respectively (Demirgüç-Kunt et al., 2018). However, the great disparity in the levels of financial inclusion in the two regions constitutes another motivation for conducting the present study. Although the authors are aware of technological innovation's importance in the current setting, there was not enough data on this matter for the period of analysis justifying removing it from the data to be analyzed about financial inclusion proxies.

Author Response File: Author Response.pdf

Reviewer 2 Report

The presented article deals with topical issues concerning the effect of financial inclusion and competitiveness on financial stability in developing countries. To enhance the quality of the study, it is worth paying attention to the aspects mentioned below:

The financial (banking) sectors of countries from Sub-Saharan Africa (SSA) as well as Latin America and the Caribbean (LAC) were chosen for the analysis. The selection of countries from the abovementioned countries for the purpose of conducting research calls for a broader justification. As of now, this field is too cursory and may arouse doubts among readers.
The summary and conclusions drawn from the study are too vague and do not present all aspects the study focuses on. They should discuss the outputs and clarify recommendations for possible implementation and future research. The summary lacks the above, therefore it clearly requires the inclusion thereof.

Author Response

Reviewer 2

The financial (banking) sectors of countries from Sub-Saharan Africa (SSA) as well as Latin America and the Caribbean (LAC) were chosen for the analysis. The selection of countries from the abovementioned countries for the purpose of conducting research calls for a broader justification. As of now, this field is too cursory and may arouse doubts among readers.