## Identifying Constraints to Financial Inclusion and Their Impact on GDP and Inequality: A Structural Framework for Policy

_IMF Working Papers, January 27, 2015_

## Source details

**Canonical URL:** [Identifying Constraints to Financial Inclusion and Their Impact on GDP and Inequality: A Structural Framework for Policy](https://www.imf.org/en/publications/wp/issues/2016/12/31/identifying-constraints-to-financial-inclusion-and-their-impact-on-gdp-and-inequality-a-42649)

## Other formats

- [Markdown version](/en/publications/wp/issues/2016/12/31/identifying-constraints-to-financial-inclusion-and-their-impact-on-gdp-and-inequality-a-42649/index.md)
- [Structured JSON version](/en/publications/wp/issues/2016/12/31/identifying-constraints-to-financial-inclusion-and-their-impact-on-gdp-and-inequality-a-42649/index.json)
- [Bundle manifest](/en/publications/wp/issues/2016/12/31/identifying-constraints-to-financial-inclusion-and-their-impact-on-gdp-and-inequality-a-42649/bundle-manifest.json)

## Bibliographic details
- Authors: Era Dabla-Norris, Yan Ji, Robert M. Townsend, Filiz D Unsal
- Published: January 27, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498381598.001

---

### Model and Methodology
- Develops a micro-founded general equilibrium model with heterogeneous agents to identify pertinent constraints to financial inclusion.
- Evaluates quantitatively the policy impacts of relaxing each constraint separately, and in combination, on GDP and inequality.
- Focuses on three dimensions of financial inclusion:
  - Access (determined by the size of participation costs).
  - Depth (determined by the size of collateral constraints resulting from limited commitment).
  - Intermediation efficiency (determined by the size of interest rate spreads and default possibilities due to costly monitoring).
- Takes the model to firm-level data from the World Bank Enterprise Survey.

### Data, Countries, and Scope
- Six countries at varying degrees of economic development:
  - Three low-income countries: Uganda, Kenya, Mozambique.
  - Three emerging market countries: Malaysia, the Philippines, and Egypt.
- Uses firm-level data from the World Bank Enterprise Survey.

### Key Findings
- Alleviating different financial frictions has a differential impact across countries.
- Country-specific characteristics play a central role in determining the linkages and tradeoffs between inclusion, GDP, inequality, and the distribution of gains and losses.

### Policy Implications and Evaluation
- Quantitative evaluation of policy impacts for relaxing:
  - Participation cost constraints (access).
  - Collateral constraints from limited commitment (depth).
  - Intermediation inefficiencies related to interest rate spreads and costly monitoring (intermediation efficiency).
- Analyses imply tradeoffs between expanding financial inclusion and effects on GDP and inequality vary by country; policy design should account for country-specific characteristics.

---

## Content in this bundle

- **_wp1522**
  - [_wp1522 (Markdown version)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2015/_wp1522.pdf.md){rel="alternate" type="text/markdown"}
  - [_wp1522 (PDF)](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2015/_wp1522.pdf){rel="external" type="application/pdf"}

---

_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/identifying-constraints-to-financial-inclusion-and-their-impact-on-gdp-and-inequality-a-42649_