Niankara I., Muqattash R. (2020), “The impact of financial inclusion on consumers saving and borrowing behaviours: A retrospective cross-sectional evidence from the UAE and the USA”, Int. J. Economics and Business Research, Vol. 20, No. 2, pp.217 - 242. DOI: 10.1504/IJEBR.2020.109152
Niankara I., Muqattash R. (2020), “The impact of financial inclusion on consumers saving and borrowing behaviours: A retrospective cross-sectional evidence from the UAE and the USA”, Int. J. Economics and Business Research, Vol. 20, No. 2, pp.217 - 242. DOI: 10.1504/IJEBR.2020.109152
Niankara I., Muqattash R. (2020), “The impact of financial inclusion on consumers saving and borrowing behaviours: A retrospective cross-sectional evidence from the UAE and the USA”, Int. J. Economics and Business Research, Vol. 20, No. 2, pp.217 - 242. DOI: 10.1504/IJEBR.2020.109152
Niankara I., Muqattash R. (2020), “The impact of financial inclusion on consumers saving and borrowing behaviours: A retrospective cross-sectional evidence from the UAE and the USA”, Int. J. Economics and Business Research, Vol. 20, No. 2, pp.217 - 242. DOI: 10.1504/IJEBR.2020.109152
Abstract
This paper highlights the impact of financial inclusion on individuals’ borrowing and saving decisions in the United States and the United Arab Emirates. It does so, using data from the 2014 Global Financial Inclusion database, and an empirical strategy consisting of first testing the significance of the joint bivariate model over its binary conterparts using the Lagrange multiplier test, followed by a contrast between the fully-parametric and semi-parametric specifications of the saving and borrowing equations. Based on model performance measures, the semi-parametric bivariate probit specification is identified as a better framework for describing the two processes of saving and borrowing, with a correlation coefficient of 12.3%. Although no significant difference exists between UAE and US residents in borrowing behavior, we find that US residents are 31.4% more likely to save than their UAE counterparts. In addition, and in line with the Permanent Income Hypothesis, the results reveal the absence of an income based saving or borrowing gradient in the two countries. Conversely, we found the prevalence of a gender based saving (12.4%) and borrowing (13.8%) inequality in favor of the male gender. Furthermore, access to a bank account and a debit card, companies policy of direct wage and salary transfer, and government transfer programs with direct deposit options are all financial inclusion strategies that are found to significantly raise the likelihood of saving and borrowing. As such, companies with payroll practices based on cash or physical paycheck issuing, especially in the US, should revise such policy to create more financial inclusion, and thereby more saving potential which in turn would contribute to further borrowing, investment and growth of the national economy.
Keywords
borrowing; economic growth; financial inclusion; saving; UAE; USA
Subject
Business, Economics and Management, Economics
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
