Digital Financial Inclusion, Remittance Inflows, and Poverty Reduction

Dear Colleagues,

Progress in financial inclusion is expected to lead to higher income levels for all people, especially those living in poverty, by enabling them to access and use basic formal financial services at an appropriate cost. To date, more than 40 developing countries have identified financial inclusion as a key policy priority. Empirical analyses of financial inclusion have also been conducted using data provided by the international organizations. The results of these analyses have demonstrated that financial inclusion plays a beneficial role in raising income levels, reducing income inequality, improving poverty conditions, extending average life expectancy, and reducing infant mortality rates.

However, some developing countries have lagged behind in establishing physical financial networks such as commercial bank branches and automated teller machines (ATMs), which have become a bottleneck in promoting financial inclusion. This is because commercial banks require significant capital investment to open new branches or install ATMs in unbanked areas, but it is difficult to generate sufficient revenue to offset the costs in areas with low population density and low-income levels. Under these circumstances, some of these countries are increasingly expanding access to and use of financial services through digital devices. This is called “digital financial inclusion.” In this type of financial inclusion, mobile money and mobile phones are being utilized as services and tools that were not used in the traditional financial inclusion.

It is well known that the progress of digital financial inclusion in some developing countries is closely related to remittances. For example, M-Pesa, which originated in Kenya and has since spread widely across East and West Africa, is now used not only for remittances but also for cash deposits, withdrawals, and payments. Another example is India’s Unified Payments Interface, which allows users with a mobile phone linked to a bank account and a debit card to make real-time transfers between bank accounts via mobile phone 24 hours a day. Such remittance functions are advancing further with the digitalization of finance, and it is expected that they will improve the beneficial effects of remittance inflows on recipient households.

In light of these new advances in development finance, this Special Issue will focus on quantitative papers that analyze the relationship between financial inclusion and remittances in the digital age and examine how these factors affect income levels, income inequality, or poverty conditions in developing countries. Additionally, this Special Issue welcomes submissions that analyze the effects of external capital inflows other than remittances, such as official development assistance and foreign direct investment, on the economies of recipient countries, only when the relationship between these capital inflows and digital finance is clarified.

Dr. Takeshi Inoue
Guest Editor

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• digital finance
• economic growth
• financial inclusion
• remittance inflows
• income inequality
• mobile money
• poverty