On the accessibility of financial services and income inequality: an international perspective

    Yifei Fu Affiliation
    ; Lu Liu Affiliation


Income inequality has long been an important issue in development economics. Applying international data from 119 countries between 2004 and 2018, this study discusses the relationship between the accessibility of financial services and income inequality. Using the density of the bank branch network to represent the accessibility of financial services, we discover that income inequality is negatively related to the accessibility of financial services, especially in less developed countries and regions. In this nexus, the poverty ratio serves as an intermediary variable. The significance of the nexus is weaker in countries where fintech is more popularized, indicating the substitution effect between fintech and traditional banking services. Nevertheless, the substitution effect is limited, and bank branches will keep playing an important role in delivering financial services. For countries with inadequate banking services, bank branches should be increased to encourage residents to participate in the financial system, while it is no longer necessary to add a large number of branches in countries where fintech has been popularized. Faced with the trend of financial digitalization and the economic shock caused by the COVID-19 pandemic, banks should launch more online services and increase intelligent machines in the branches. By doing so, financial services are more resilient to social changes, so as to alleviate the inequality of income distribution in the long term.

Keyword : financial services, income inequality, bank branches, fintech, inclusive finance, COVID-19

How to Cite
Fu, Y., & Liu, L. (2023). On the accessibility of financial services and income inequality: an international perspective. Technological and Economic Development of Economy, 29(3), 814–845.
Published in Issue
Apr 12, 2023
Abstract Views
PDF Downloads
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.


Addai, B., Tang, W., Twumasi, M. A., Asante, D., & Agyeman, A. S. (2022). Access to financial services and lighting energy consumption: Empirical evidence from rural Ghana. Energy, 253, 124109.

Ahmadalipour, A., Moradkhani, H., & Castelletti, A., & Magliocca, N. (2019). Future drought risk in Africa: Integrating vulnerability, climate change, and population growth. Science of The Total Environment, 662, 672–686.

Alcorn, C. (2020). US billionaires’ fortunes have skyrocketed $845 billion since March. CNN Business.

Aluko, O. A., & Ajayi, M. A. (2018). Determinants of banking sector development: Evidence from Sub-Saharan African countries. Borsa Istanbul Review, 18(2), 122–139.

Ashraf, N., Karlan, D., & Yin, W. (2010). Female empowerment: Impact of a commitment savings product in the Philippines. World Development, 38(3), 333–344.

Attanasio, O., Augsburg, B., De Haas, R., Fitzsimons, E., & Harmgart, H. (2011). Group lending or individual lending? Evidence from a randomised field experiment in Mongolia. MPRA Paper 35439. University Library of Munich, Germany.

Avram, S., & Popova, D. (2022). Do taxes and transfers reduce gender income inequality? Evidence from eight European welfare states. Social Science Research, 102, 102644.

Banerjee, A. V., & Newman, A. F. (1993). Occupational choice and the process of development. Journal of Political Economy, 101(2), 274–298.

Banerjee, A. V., Bardhan, P., Duflo, E., Field, E., Karlan, D., Khwaja, A., Mookherjee, D., Pande, R., & Rajan, R. (2010, December 12). Microcredit is not the enemy. Financial Times.

Banna, H., Hassan, M. K., & Rashid, M. (2021). Fintech-based financial inclusion and bank risk-taking: Evidence from OIC countries. Journal of International Financial Markets, Institutions and Money, 75, 101447.

Baron, R. M., & Kenny, D. A. (1986). The moderator-mediator variable distinction in social psychological research: Conceptual, strategic, and statistical considerations. Journal of Personality and Social Psychology, 51(6), 1173–1182.

Beck, T., Demirgü-Kunt, A., & Levine, R. (2007). Finance, inequality and the poor. Journal of Economic Growth, 12(1), 27–49.

Behzadan, N., & Chisik, R. (2022). Income inequality, international trade and firm location. Economics Letters, 214, 110442.

Bellardini, L., Del Gaudio, B. L., Previtali, D., & Verdoliva, V. (2022). How do banks invest in fintechs? Evidence from advanced economies. Journal of International Financial Markets, Institutions and Money, 77, 101498.

Burgess, R., & Pande, R. (2005). Do rural banks matter? Evidence from the Indian social banking experiment. American Economic Review, 95(3), 780–795.

Carpa, N., & Martínez-Zarzoso, I. (2022). The impact of global value chain participation on income inequality. International Economics, 169, 269–290.

Chen, B., Zhang, P., & Yang, R. (2010). Government investment in education, human capital investment and the urban-rural income gap in China. Management World, 2010(01), 36–43.

Chen, X., You, X., & Chang, V. (2021). FinTech and commercial banks’ performance in China: A leap forward or survival of the fittest? Technological Forecasting and Social Change, 166, 120645.

Cheng, M., & Qu, Y. (2020). Does bank FinTech reduce credit risk? Evidence from China. Pacific-Basin Finance Journal, 63, 101398.

Chiu, Y.-B., & Lee, C.-C. (2019). Financial development, income inequality, and country risk. Journal of International Money and Finance, 93, 1–18.

Cho, T.-Y., & Chen, Y.-S. (2021). The impact of financial technology on China’s banking industry: An application of the metafrontier cost Malmquist productivity index. The North American Journal of Economics and Finance, 57, 101414.

Choe, J. (2008). Income inequality and crime in the United States. Economics Letters, 101(1), 31–33.

Compaoré, A. (2022). Access-for-all to financial services: Non-resources tax revenue-harnessing opportunities in developing countries. The Quarterly Review of Economics and Finance, 85, 236–245.

Contreras, S., Ghosh, A., & Hasan, I. (2023). The effect of bank failures on small business loans and income inequality. Journal of Banking & Finance, 146, 106690.

Coulibaly, A., & Yogo, U. T. (2020). The path to shared prosperity: Leveraging financial services outreach to create decent jobs in developing countries. Economic Modelling, 87, 131–147.

Dabla-Norris, E., Ji, Y., Townsend, R., & Unsal, F. D. (2015). Identifying constraints to financial inclusion and their impact on GDP and inequality: A structural framework for Policy (IMF Working Papers). International Monetary Fund.

De Gregorio, J. (1996). Borrowing constraints, human capital accumulation, and growth. Journal of Monetary Economics, 37(1), 49–71.

Demirguc-Kunt, A., Klapper, L., Singer, D., & Van Oudheusden, P. (2015). The Global Findex database 2014: Measuring financial inclusion around the World (Policy Research Working Papers). World Bank Group.

Dewan, P., Rørth, R., Jhund, P. S., Ferreira, J. P., Zannad, F., Shen, L., Køber, L., Abraham, W. T., Desai, A. S., Dickstein, K., Packer, M., Rouleau, J. L., Solomon, S. D., Swedberg, K., Zile, M. R., &

McMurray, J. J. V. (2019). Income inequality and outcomes in heart failure: A global between-country analysis. JACC: Heart Failure, 7(4), 336–346.

Dollar, D., & Kraay, A. (2002). Growth is good for the poor. Journal of Economic Growth, 7(3), 195–225.

Enamorado, T., López-Calva, L. F., Rodríguez-Castelán, C., & Winkler, H. (2016). Income inequality and violent crime: Evidence from Mexico’s drug war. Journal of Development Economics, 120, 128–143.

Ergungor, O., & Moulton, S. (2014). Beyond the transaction: Banks and mortgage default of low‐income homebuyers. Journal of Money, Credit, and Banking, 46(8), 1721–1752.

Fareed, F., Gabriel, M., Lenain, P., & Reynaud, J. (2017). Financial inclusion and women entrepreneurship: Evidence from Mexico. Documents de travail du Département des Affaires économiques de l’OCDE.

Fatmawati, Khan, M. A., Azizah, M., Windarto, & Ullah, S. (2019). A fractional model for the dynamics of competition between commercial and rural banks in Indonesia. Chaos, Solitons & Fractals, 122, 32–46.

Fu, J., & Mishra, M. (2022). Fintech in the time of COVID-19: Technological adoption during crises. Journal of Financial Intermediation, 50, 100945.

Galor, O., & Zeira, J. (1993). Income distribution and macroeconomics. The Review of Economic Studies, 60(1), 35–52.

Gan, L. (2020, April 10). L. Gan: Suggest releasing CNY 750 billion in cash subsidies, CNY 2,300 for each household. Sina News (in Chinese).

Goldberg, P. K., & Pavcnik, N. (2007). Distributional effects of globalization in developing countries. Journal of Economic Literature, 45(1), 39–82.

Hanson, G. H., & Harrison, A. (1999). Trade liberalization and wage inequality in Mexico. Industrial and Labour Relations Review, 52(2), 271–288.

Higgs, G., Price, A., & Langford, M. (2022). Investigating the impact of bank branch closures on access to financial services in the early stages of the COVID-19 pandemic. Journal of Rural Studies, 95, 1–14.

Hu, Z. (2021). The effect of income inequality on human capital inequality: Evidence from China. Structural Change and Economic Dynamics, 58, 471–489.

Huang, K., Yan, W., Sim, N., Guo, Y., & Xie, F. (2022). Can trade explain the rising trends in income inequality? Insights from 40 years of empirical studies. Economic Modelling, 107, 105725.

Hwang, S., Choe, C., & Choi, K. (2021). Population ageing and income inequality. The Journal of the Economics of Ageing, 20, 100345.

Jalilian, H., & Kirkpatrick, C. (2002). Financial development and poverty reduction in developing countries. International Journal of Finance & Economics, 7(2), 97–108.

Jaumotte, F., Lall, S., & Papageorgiou, C. (2013). Rising income inequality: Technology, or trade and financial globalization? IMF Economic Review, 61, 271–309.

Kábrt, T., & Brůna, K. (2022). Asymmetric effects of foreign capital on income inequality: The case of the Post-China 16 countries. Economic Analysis and Policy, 76, 613–626.

Karlan, D. S., & Zinman, J. (2010). Expanding credit access: Using randomized supply decisions to estimate the impacts. The Review of Financial Studies, 23(1), 433–464.

Kiendrebeogo, Y., & Minea, A. (2013). Accès aux services financiers et réduction de la pauvreté dans les PED. Revue Économique, 64(3), 483–493.

Kim, D.-H., & Lin, S.-C. (2011). Nonlinearity in the financial development–income inequality nexus. Journal of Comparative Economics, 39(3), 310–325.

Kotschy, R. (2022). Health improvements impact income inequality. The Journal of the Economics of Ageing, 22, 100385.

Krause, M. (2015). Institutional quality index 2015. Red Liberal de America Latina.

Kreiss, K. (2021, December 17). Bank Branches and COVID-19: Where are Banks Closing Branches during the Pandemic? FEDS Notes. Board of Governors of the Federal Reserve System.

Kuznets, S. S. (1955). Economic growth and income inequality. American Economic Review, 45(1), 1–28.

Lee, C.-C., Li, X., Yu, C.-H., & Zhao, J. (2021). Does fintech innovation improve bank efficiency? Evidence from China’s banking industry. International Review of Economics & Finance, 74, 468–483.

Lee, C.-C., Wang, C.-W., & Ho., S.-J. (2020). Financial inclusion, financial innovation, and firms’ sales growth. International Review of Economics & Finance, 66, 189–205.

Lee, C.-C., Wang, C.-W., & Ho, S.-J. (2022a). Financial aid and financial inclusion: Does risk uncertainty matter? Pacific-Basin Finance Journal, 71, 101700.

Lee, C.-C., Wang, C.-W., & Pan, C.-M. (2022b). Do financial inclusion and R&D matter? Exploring the effect of uncertainty on economic performance. Applied Economics, 54(3), 307–325.

Lee, C.-C., Wang, F., & Lou, R. (2022c). Digital financial inclusion and carbon neutrality: Evidence from non-linear analysis. Resources Policy, 79, 102974.

Lee, C.-C., Xing, W., & Lee, C.-C. (2022d). The impact of energy security on income inequality: The key role of economic development. Energy, 248, 123564.

Lee, C.-C., Yuan, Z., & Ho, S.-J. (2022e). How does export diversification affect income inequality? International evidence. Structural Change and Economic Dynamics, 63, 410–421.

Li, C., He, S., Tian, Y., Sun, S., & Ning, L. (2022). Does the bank’s FinTech innovation reduce its risk-taking? Evidence from China’s banking industry. Journal of Innovation & Knowledge, 7(3), 100219.

Liu, L. (2023). Mortgage loan and housing market. International Review of Economics & Finance, 83, 736–749.

Liu, L., Huang, J., & Li, H. (2022). Estimating the real shock to the economy from COVID-19: The example of electricity use in China. Technological and Economic Development of Economy, 28(5), 1221–1241.

Mehrotra, A. N., & Yetman, J. (2015). Financial inclusion – issues for central banks. BIS Quarterly Review, 83–96.

Mehta, A., & Hasan, R. (2012). The effects of trade and services liberalization on wage inequality in India. International Review of Economics & Finance, 23, 75–90.

Mookerjee, R., & Kalipioni, P. (2010). Availability of financial services and income inequality: The evidence from many countries. Emerging Markets Review, 11(4), 404–408.

Morgan, D. P., Pinkovskiy, M. L., & Yang, B. (2016). Banking deserts, branch closings and soft information. Federal Reserve Bank of New York.

Murinde, V., Rizopoulos, E., & Zachariadis, M. (2022). The impact of the FinTech revolution on the future of banking: Opportunities and risks. International Review of Financial Analysis, 81, 102103.

Ndichu, D. (2021, February 21). Revealed: Impact of Covid-19 on GCC retail banks revenues. Gulf Business.

Nguyen, H.-L. Q. (2019). Are credit markets still local? Evidence from bank branch closings. American Economic Journal: Applied Economics, 11(1), 1–32.

People’s Bank of China. (2018). Analysis Report of inclusive financial indicators in China (in Chinese).

Popov, V. (2022). Why Europe looks so much like China: Big government and low income inequalities. Asia and the Global Economy, 2(1), 100024.

Ramos, R. G., & Melo, S. N. (2022). Income inequality and the geography of residential burglaries: A spatial model applied to Campinas, Brazil. Applied Geography, 147, 102787.

Sahay, R., Cihak, M., & N’Diaye, P. M., Barajas, A., Mitra, S., Kyobe, A. J., Mooi, Y. N., & Yousefi, R. (2015). Financial inclusion: Can it meet multiple macroeconomic goals? Staff Discussion Notes. International Monetary Fund.

Saxena, R., & Punekar, R. M. (2020). Designing pro-poor mobile financial services: Learning from the financial diaries of urban poor in India. World Development Perspectives, 20, 100266.

Sen, A. (1999). The possibility of social choice. American Economic Review, 89(3), 349–378.

Sethi, P., Bhattacharjee, S., Chakrabarti, D., & Tiwari, C. (2021). The impact of globalization and financial development on India’s income inequality. Journal of Policy Modeling, 43(3), 639–656.

Shahpari, G., & Davoudi, P. (2014). Studying effects of human capital on income inequality in Iran. Procedia – Social and Behavioral Sciences, 109, 1386–1389.

Solt, F. (2020). Measuring income inequality across countries and over time: The standardized world income inequality database. Social Science Quarterly, 101(3), 1183–1199.

Song, X. (2017). Empirical analysis of digital inclusive finance bridging the urban-rural residents’ income gap. Finance & Economics, 2017(06), 14–25.

Song, Y., Paramati, S. R., & Ummalla, M., Zakari, A., & Kummitha, H. R. (2021). The effect of remittances and FDI inflows on income distribution in developing economies. Economic Analysis and Policy, 72, 255–267.

Wan, G., Wang, C., Wang, J., & Zhang, X. (2022). The income inequality-CO2 emissions nexus: Transmission mechanisms. Ecological Economics, 195, 107360.

Wang, Q., & Liu, L. (2022). Pandemic or panic? A firm-level study on the psychological and industrial impacts of COVID-19 on the Chinese stock market. Financial Innovation, 8(1), 36.

Wasiaturrahma, Sukmana, R., Ajija, S. R., Salama, S. C. U., & Hudaifah, A. (2020). Financial performance of rural banks in Indonesia: A two-stage DEA approach. Heliyon, 6(7), e04390.

World Bank. (2017). Global Findex Database 2017.

World Wealth and Income Database. (2022). Income inequality in USA, 1913–2021.

Yang, W., Sui., X., & Qi, Z. (2021). Can fintech improve the efficiency of commercial banks? – An analysis based on big data. Research in International Business and Finance, 55, 101338.

Zhan, P., Ma, X., & Li, S. (2021). Migration, population aging, and income inequality in China. Journal of Asian Economics, 76, 101351.

Zhang, L., & Zhan, Y. (2006). The analysis and test of three major effects of financial development on the urban-rural income disparity. The Journal of Quantitative & Technical Economics, 2006(12), 73–81.

Zhang, Q., & Posso, A. (2019). Thinking inside the box: A closer look at financial inclusion and household income. The Journal of Development Studies, 55(7), 1616–1631.

Zhang, Y., Fu, D., & Xiang, P. (2020). Financial openness and income inequality: An inverted-U shape relationship. Journal of Capital University of Economics and Business, 22(6), 59–82.

Zhao, J., Li, X., Yu, C.-H., Chen, S., & Lee, C.-C. (2022). Riding the FinTech innovation wave: FinTech, patents and bank performance. Journal of International Money and Finance, 122, 102552.

Zhou, J., & Zhao, W. (2019). Contributions of education to inequality of opportunity in income: A counterfactual estimation with data from China. Research in Social Stratification and Mobility, 59, 60–70.