Financial Innovation for Financial Inclusion: Mapping Potential Access to Finance

Abstract

The importance of access to finance as a significant problem for business development is considered one of the measures representing the level of financial inclusion. Developing financial innovations, such as crowdfunding, mobile payments, AI-based credit scoring systems, and even blockchain technologies has an immense potential to increase financial inclusion, increase access to finance for individuals and businesses, enabling the unscored or unbanked population to become active members of financial markets. Studies have shown the positive impact of financial technology on individuals' financial inclusion and access to finance, but the development of the Fintech phenomenon does not itself imply improved access to finance for businesses. The spread and adoption of Fintech are taken as evidence of financial innovation This research aims to explore the expected interaction between financial innovation and financial inclusion in selected European countries. The data from the Global Fintech Ranking and Survey on the access to finance of enterprises (SAFE) is used in this study, examining them by comparing countries by their Fintech rankings and respective rank position obtained by measuring the importance of access to finance as a problem in business development. The analysis of 29 European countries indicates that theoretically defined expectations are met in most cases: access to finance is not an important problem for the companies from the countries that are ranked higher in the Fintech rating report. But part of the sampled countries deviates from this trend. These findings indicate that besides financial innovation other factors also may determine the financial inclusion of the companies.