30 May 2016
An international research project, in which Professors Christine Oughton, Laurence Harris and Reinhard Bachmann of SOAS University of London’s School of Finance and Management, are co-investigators under the leadership of SOAS's Professor Victor Murinde (formerly University of Birmingham), has been awarded more than £2 million.
The four-year research project will explore the relationships between financial inclusion and growth in low income countries (LICs) in Africa. Building on new theoretical work, the empirical and policy analysis of the research aims to increase our understanding of how financial inclusion and growth might be enhanced by policy measures in low income counties. The project is funded by the Growth Research Programme of the Department for International Development (DFID) and the Economic and Social Research Council (ESRC), which aims ‘to strengthen evidence-based policymaking that contributes to inclusive and economically sustainable growth and poverty reduction in LICs, through enhanced quality and impact of relevant social science research’.
SOAS School of Finance and Management achieved the award as a partner in the international consortium led by Professor Murinde with the African Economic Research Consortium (AERC) as an institutional partner, and including researchers from universities and research institutes in the UK, the Netherlands, USA, Canada, and Ghana. It builds on the long established relationship between the AERC and SOAS.
While financial institutions can contribute to economic growth, many households and enterprises in low income countries are financially excluded by being unable to fully participate in the financial sector. At the same time low income countries’ governments and enterprises may be excluded from full access to international capital markets. Similarly, while new technology, such as mobile money transfer systems, has strengthened financial inclusion, gaps in access to finance as well as gaps in the development of financial systems seem to be getting wider following the 2007-09 global financial crisis. Overall, the current consensus is that there is an urgent need for research on inclusive finance and its potential contribution to lifting low income countries to the level of their medium income peers.
The project’s focus on delivering policy relevant research on inclusive financial development, is highlighted by Professor Victor Murinde, the Principal Investigator, who said “the project will: deliver rigorous, high quality research to support financial inclusion policies; develop innovative financial products in collaboration with households, banks, and the private sector; involve collaborative research to enhance methodologies and data for the promotion of inclusive finance; and engage with policy-makers to provide research-based advice on financial inclusion in Africa”.
Professor Murinde continued, “this research is vital for embedding financial inclusion in African economies, and aims to have a significant impact on society as a whole”.
Professor Christine Oughton, Head of the School of Finance and Management at SOAS University of London said, “this project will explore the role of financial inclusion and technological diffusion in shaping sustainable growth and in low income countries. It will shed much-needed light on the question of how inclusive finance can facilitate technological innovation, diffusion and prosperity that is widely diffused throughout society.”
Professor Laurence Harris, at SOAS University of London, explained “We live in an era of great changes in the world of finance which creates both dangers and great potential benefits. This four year research programme enables us to examine how changes can benefit low income countries and to share our findings with those countries’ policy makers and people.”
“The conversation in Africa has now shifted, beyond the growth renaissance the region has witnessed over the years, to that of inclusive growth that is sustainable. Inclusive finance is at the center of this transformation, and hence the project is very timely. AERC is privileged to be a partner, since the project pervades its entire capacity building framework inclusive of research, collaborative graduate training, policy outreach, and vast network.”, says Professor Lemma W. Senbet, AERC Executive Director.
To be delivered over a four year period (2016-2020), the research addresses three core questions:
(i) How can institutional frameworks support inclusive financial development?
(ii) What role do private and public capital inflows play in domestic financial inclusion in Africa?
(iii) How can private and public institutions in Africa be a catalyst and channel for technological diffusion and financial inclusion?
The research project will be launched on 30 May 2016 at the Biannual Meeting of the AERC in Nairobi in the presence of African and international economists and African policy makers.