Compared with traditional finance, the most prominent feature of green finance is that it emphasizes the environmental benefits of human society. 95-120. Compared with the differential GMM, the system GMM can effectively deal with unobserved heterogeneity problem. The purpose of this paper is to focus on measuring financial inclusion (FI) level for the developing countries. Since 2002, many financial institutions around the world have adopted the “Equator Principles” to pay more attention to the development of green finance. The GFIs of Beijing and Shanghai are relatively high. And by doing so, we estimate the overall FI index for developing countries as shown in Tables 5 and 6. The advantages and improved models of the entropy weight method will be introduced below. On the other hand, the starting year of the research period is 2012 because the introduction of mobile money this year is considered a bright spot in the expansion of financial services in developing world (Demirguc-Kunt and Klapper, 2012). Archives. (2004), “How robust is the foreign policy-Kearney globalization index?”, The World Economy, Vol. 1-8. From Table 5 and Figures 1–7, the green finance development is unbalanced not only in different regions but also in different provinces within a specific region. Financial Development Index Rankings xv Part 1: Findings from the Financial 1 Development Index 1.1 The Financial Development Index: 3 Assessing the World’s Financial Systems by Nouriel Roubini and James Bilodeau 1.2 Finance, Growth, and the Poor 27 by Ross Levine 1.3 Financial Crises, Financial Stability, and Reform: 33 Found inside – Page 33(World Development Report 2020, Concept Note, January 11, 2019, p. ... The Financial Development Index is a multidimensional synthetic index constructed by ... Read the winning articles. The development of infrastructure plays an indispensable role in a country’s economic development. The Community Development Financial Institutions Program (CDFI Program) provides Financial Assistance (Base-FA) and Technical Assistance (TA) awards to help certified and emerging CDFIs sustain and expand their services and build their technical capacity. The report provides a synthesis of what we know, as well as areas where more evidence is still needed. Global Financial Development Report 2019/2020 is the fifth in a World Bank series. At the core of this agenda are 17 Sustainable Development Goals (SDGs) – and the 169 targets that support them – which are intended to end poverty, protect the planet and ensure prosperity for all. Therefore, we should improve the green finance development index of each region and improve the level of green finance development. (2012) developed the FI index to measure level of FI in India by taking the average of four important dimensions such as: outreach, usage, ease of transactions and cost of transactions; then Sarma (2008, 2012, 2015, 2016) examined three basic dimensions of FI: banking penetration, availability of banking services and usage. This article is published under the Creative Commons Attribution (CC BY 4.0) license. Similar to Sarma (2008), Park and Mercado (2015, 2018) calculated the FI index by combining five factors: ATMs, bank branches, borrowers, depositors and domestics credit to GDP ratio. 44, pp. Some scholars have made related research on green finance. Found insideThis is the United Nations definitive report on the state of the world economy, providing global and regional economic outlook for 2020 and 2021. Thus, measurement of FI is necessary to study the impact of various initiatives by stakeholders and to decide on the future course of action. The results from Tables 7 and 8 present the correlation between our FI index generated by PCA technology and the household-based indicator (account) from Global Findex database, also as with index of FI from Park and Mercado (IFI) is very strong (the strength of association is 51% and 75% respectively). Child marriage, women married by age 18 (% of women ages 20–24 who are married or in union) n.a. The GFCI serves as a valuable reference for policy and investment decision-makers. As early as 1974, the Federal Republic of Germany established the world’s first policy-based environmental protection bank, named “Eco Bank,” which was responsible for providing preferential loans for environmental projects that general banks were unwilling to accept. The Human Capital Index (HCI) database provides data at the country level for each of the components of the Human Capital Index as well as for the overall index, disaggregated by gender. Thereby, there are effective solutions to increase the level of FI to achieve the goal of sustainable economic growth. The paper analyzes the effect of green finance on poverty alleviation from an empirical perspective and verifies the value of sustainable development for green finance, indicating that green development and economic growth are not incompatible. The following correlation matrices are designed to shed light on the relationship between our FI and other FI indexes. Therefore, income per capita is a positive indicator of green finance. And of course, the “branches” here include not only the number of commercial bank branches but also the data of credit union, credit cooperative and all microfinance institution branches. 1-27. These are the top accomplishments from FY 2020. invested in America’s disadvantaged communities since 1994. India Rank In All Index 2020 PDF | List of Global Indexes 2020. The EGDI assesses e-government development at a national level and is … 122, pp. Xi & An (2018) [13] used the financial indicators of energy stocks to construct a complex network. The access (penetration of financial services): A comprehensive financial system needs to have as many users as possible, meaning that it must penetrate widely among those who use it. All provinces and cities should develop green energy, green environmental protection industry, and energy conservation and environmental protection industry. Even the use of individual indicators can lead to misunderstandings about the level of FI in an economy (Sarma, 2016). Existing literatures mainly use alternative indicators to be the proxy of the green finance development index, such as Sarah et al. As across developing countries, mobile network coverage, registration and now smartphone ownership is high or rising rapidly. 1, pp. The results of the FI index rankings of the countries in these two tables also show that the economy with the highest FI level among the sample countries is Mauritius, while the lowest one is Tanzania. 457-471. Three dimensions are also indices that we estimate by principal components as linear functions of the explanatory variables. Anwar, S.R., Tanzo, T.T. Found inside – Page 113The Financial Development Index (FDI) is constructed upon the available data. ... Dabwor DT (2020) Testing the nexus between renewable energy consumption ... Found insideThere is a vast body of literature estimating the impact of financial development on economic growth, inequality, and economic stability. Accordingly, regarding penetration dimension, the weights assigned to the first component are −0.7071 (DBaccounts); 0.7071 (MBaccounts). (2014), “Financial inclusion Strategies of banks: study of Indian states”, International Journal of Applied Financial Management Perspectives, Vol. Relevant indicators of green finance development. This study uses annual data collected from the results of Financial Access Survey (FAS) of the IMF and Global Findex database of WB for period 2012–2018 in 40 developing countries (the list is attached in Appendix – Table A1). where IFIi : index of FI from Park and Mercado (2018); FIIi : our FI index. Blockchain is undoubtedly going to be the spine of the sharing economy. Life expectancy of Indians at birth in 2019 was 69.7 years while Bangladesh has a life expectancy of 72.6 years and Pakistan 67.3 years, the 2020 Human Development Report said. Demirguc-Kunt, A. and Klapper, L. (2012), “Measuring financial inclusion: the global Findex database (No. Figure 1 indicates the unbalanced green finance development in north China. 614-642. This paper believes that green finance means that financial institutions incorporate environmental assessment into the process and pay attention to the protection of the ecological environment and the development of green industries in their investment and financing activities. Finance contributes to poverty alleviation through economic growth, and the development of green finance is related to the sustainable development of the world economy and environment. GFI of provinces and cities from 2004 through 2017. So, the Engel coefficient is not unsuitable for China’s case. Table 2 above presents descriptive statistics about the indicators we use to measure FI. Received 29 March 2020 Revised 14 July 2020 Accepted 5 August 2020 Journal of Economics and Development Vol. (2016), “Does financial inclusion affect monetary policy in SAARC countries?”, Cogent Economics and Finance, Vol. 56 No. Table 7 shows the estimation results of the multiple regression model and static (fixed-effect) and dynamic (system GMM) panel model. However, dimensional weights are set at arbitrary values (the weights for access, availability and usage are 1, 0.5 and 0.5). Public Disclosure Authorized 1 World Bank GRI Index 2020 This 2020 World Bank GRI Index is an inventory of the sustainability considerations used in World Bank lending and analytical services, as well as within its corporate practices. This sustainability disclosure index has been prepared in accordance with the Core option of the GRI Specifically, Table A6-Appendix also shows that the PCA assigns the highest weight to availability (0.5846), followed by penetration with a weight of −0.5838 and usage at 0.5634. Since the inception, the CDFI Fund has completed six rounds of the program and has guaranteed more than. The next section provides an overview of the theoretical basis and previous studies. And to answer the main research questions, a two-stage PCA method is used to build the FI index. From here, there is a solution to combine FI into calculating its impact levels on other factors. OVERALL SCORE 83.9. Amount of sulfur dioxide/(deposit + loan), Amount of energy consumption/(deposit + loan), Amount of nature reserve/(deposit + loan), Logarithm of per capita consumption expenditure, Government intervention in economic level, Logarithm of the total import and export volume, The logarithm of the average number of students enrolled in higher education institutions per 100,000 people, Logarithm of the total assets of financial institutions, H. Jalilian and C. Kirkpatrick, “Financial development and poverty reduction in developing countries,”, P. Arestis and A. Caner, “Financial liberalization and poverty: channels of influence,” in, J. Shan, “Does financial development “lead” economic growth? (2007); Gupte et al. Therefore, in this paper, we use the system GMM to do the estimation. Meanwhile, Camara and Tuesta (2014) used two-stage PCA, wherein, in the first stage, they estimated three subindices (usage, access and barriers), which defined their FI measure. The first representative view is that finance development and poverty alleviation are positively correlated [26–28], such as Beck et al. The results of multiple regression analysis demonstrate that the GFI, inflation, financial asset level, and economic development level all significantly positively affect poverty alleviation. Accordingly, with increasing interest from policymakers on the importance of FI, the measurement of FI has also been focused. The study of poverty by Rowntree and Booth is considered to represent the beginning of the study of poverty in the social sciences. The Human Capital Index (HCI) database provides data at the country level for each of the components of the Human Capital Index as well as for the overall index, disaggregated by gender. (2019). Table A5- Appendix shows that the KMO measure value = 0.73 satisfies KMO > 0.5 (Hair et al., 1998). (2014), “Assessing countries' financial inclusion standing-A new composite index (No. Notes: because of space limitations, the statistical characteristics of only some indicators from 2017 are provided. This is a partial recovery. The improved entropy weight method is defined as follows:(1)If m provinces are selected for measuring their GFIs, in order to calculate the GFI, we choose n indicators. And this has brought criticism in the academic community. From the above analysis, we can find that there is a positive relationship between the degree of green finance and regional economic development. First, according to the relationship between basic indicators and green finance, the basic indicators are divided into positive indicators and negative indicators. The fourth representative view is that finance development may be detrimental to poverty alleviation [35], such as Claessens and Perotti (2007). 6025)”, The World Bank, available at: https://www.bbvaresearch.com/wp-content/uploads/2014/09/WP14-26_Financial-Inclusion.pdf. Accordingly, three dimensions of FI are chosen: the access (penetration of financial services), the availability and the usage. Found inside – Page 125... 0.9 1.0 Financial Development Index In short, we all need finance—to pay our bills, to provide the ATMs, to channel savings into productive investment, ... Table 3 shows the statistical characteristics of the 17 indicators in this paper. ADVERTISEMENTS: […] In particular, the financial services mentioned in most of the studies here are savings, credit, insurance and payment (Hannig and Jansen, 2010; Ghosh and Ghosh, 2014; Camara, Tuesta, 2015; World Bank, 2018). Thirdly, this paper systematically studies the relationship between the green finance development and poverty alleviation. 539 - March 2018), Income inequality and regional index of financial inclusion for Islamic bank in Indonesia, Index of financial inclusion–a measure of financial sector inclusiveness (No. Found inside – Page 35Index of Financial Development, 2008–18 (Percent) 60 9 0.4 Number of exits ... 18 09 10 11 12 13 14 15 16 17 Sources: E&Y and AVCA (2018); and AVCA (2020b). 1, pp. 141-151. From 2004 to 2008, the green finance development index of Beijing showed an upward trend and then gradually decreased with a small decrement, but it is still the highest in north China and even the whole country. 23 No. 234-266. From the above empirical analysis, we can see that infrastructure construction has a positive role in promoting poverty alleviation. (4)Increasing investment in infrastructure. It can also be compared over time to a large number of countries around the globe. For estimating dynamic panel models, predominantly the differential GMM and system GMM are used. Rowntree and Booth emphasize family income because of its necessity to survival. 1, pp. WORLD RANK 2. This indicates that the three dimensions measuring the same latent structure are interpreted as the FI level. The report covers 101 countries, including 31 low-income countries, 68 middle-income countries, and 2 high-income countries. The Bank Enterprise Award Program (BEA Program) provides monetary awards to federally insured banks and thrifts that demonstrate increased lending, investment, and service activities in the most economically distressed communities and/or in CDFIs. On the basis of the above analysis, make an empirical analysis of the impact of the green finance development index on poverty alleviation using multiple regression analysis and static panel and dynamic panel estimation methods. #2 New Zealand. Second, our FI index overcomes the use of incomplete proxies for FI. Each province should pay attention to the innovation of green financial development. In addition, as mentioned in the introduction, the absence of “mobile money” factor in measuring FI is also one of the key points that this study must fill. Limited by the statistical data availability for all regions, this paper adopts per capita consumption expenditure to represent poverty levels and analyze the ability of green finance development to explain poverty. Accordingly, in each dimension of FI, we have added many indicators related to mobile money services such as: number of mobile money accounts (penetration dimension), number of mobile money agents (availability dimension) and value of mobile money transactions (usage dimension). is considered one of immediate action can accelerate FI. $100 invested on 6/30/15 in stock or index, including reinvestment of dividends. Research demonstrates that the entropy weight evaluation model has the benefits of high calculation accuracy, a wide application range, and limited susceptibility to subjective factors. in bonds guaranteed through the CDFI Bond Guarantee Program. Except the first PC (comp1 of all three dimension), no other PCs have an eigenvalue greater than 1. In order to attain the second research goal, we conduct a test of the validity of the newly developed FI index. In the process of poverty alleviation through finance, we must also pay attention to the sustainable development of the economy. (Yip,  Yia,  Yiu): the dimensions of the penetration, the availability and the usage respectively are computed as: The variables in the model (2), (3), (4) are as follows: Based on Sarma (2015, 2016), we develop a multidimensional FI index on the basis of combining as many dimensions of FI information as possible. Since when used alone, these indicators can only provide partial and incomplete information about the comprehensiveness of the financial system. The higher the unemployment rate, the lower the development of green finance. (2014) constructed a FI index as a composite of variables pertaining to multiple dimensions: outreach, usage and quality. It helps to assess and compare the level of FI of each country and between countries together, made easily and accurately. Finance contributes to poverty alleviation through economic growth, and the development of green finance is related to the sustainable development of the world economy and environment. First published in 2008, the Financial Development Index was developed by the World … Green finance not only helps promote sustainable economic development but also helps reduce poverty. All provinces and cities should develop green energy, green environmental protection industry, and energy conservation and environmental protection industry. And as analyzed in two above dimensions, we add: mobile money transactions value (% of GDP) (mobile money transactions) to fill the research gap (see Table 1). The Global Financial Development Database is an extensive dataset of financial system characteristics for 203 economies. Found inside – Page 135CGD (2020), The Commitment to Development Index 2020, Center for Global Development, ... G20 (2020), “G20 finance ministers & central bank governors meeting ... Up … The parameter estimation results appear in Table 6. 14-36), Monetary policy and financial inclusion in sub-Sahara Africa: a panel VAR approach, Financial inclusion-A comparative study on South Asia, Reaching out: access to and use of banking services across countries, Measuring financial inclusion: a multidimensional index (No. 990-996. Therefore, the contribution of Amidžić et al. Found inside – Page 494gas emissions, financial development, energy prices, trade, foreign direct investment, human capital Index may be given as examples. Le et al. (2020) ... to develop the FI index for developing economies; based on the approach of Camara and Tuesta (2014), we compute FI index by employing a two-stage PCA: •The first stage of the PCA: estimate the dimensions (three sub-indices: Access, Availability and Usage). Therefore, dynamic panel models must be used to study the dynamic relationship between the GFI and poverty alleviation. GFCI 29 provides evaluations of future competitiveness and rankings for 114 financial centres around the world. 1426)”, BBVA Bank, Economic Research Department, available at: https://www.bbvaresearch.com/wp-content/uploads/2014/09/WP14-26_Financial-Inclusion.pdf. Lei and Wang (2020) [15] used panel regression methods to analyze the relationship between environmental pollution, green finance, and high-quality economic development and used spatial measurement methods to conduct robustness tests. Therefore, based on Camara and Tuesta (2014), we develop a FI index via PCA method to find the appropriate weights (parametric method) and postulate that the latent variable FII is linearly determined as follows: w1, w2, w3: the relative weights of each dimension. Evidence from previous studies shows that indicators respond quickly to subjective weight assignments, because a slight change in weight can affect the objectivity of the results (Camara and Tuesta, 2014; Lockwood, 2004). Article of the Year Award: Outstanding research contributions of 2020, as selected by our Chief Editors. Infrastructure construction is the driving force of economic development, which plays a huge role in promoting national economic growth. The ranking is based on an index for financial … Vietnam. Moreover, when combined with other studies, it shows that our FI index not only corroborates with them but is also superior to Sarma's technique. System GMM analysis reveals that GFI, infrastructure construction, and financial asset levels have significant positive effects on poverty alleviation, and openness has a significant negative effect on poverty alleviation. Green financial industry has the characteristics of long industrial chain, high degree of relevance, and strong absorption capacity, which has a comprehensive pulling effect on economic development and can effectively alleviate poverty. Sethi, D. and Sethy, S.K. Accordingly, mobile money accounts have become an important means of conducting financial transactions for many households in developing countries (Mehrotra and Nadhanael, 2016). (3)The level of economic development should be improved in all regions. FI index in developing countries (2012–2018), FI index and household-based indicator (account), FI index and index of FI from Park and Mercado (2018), Summary of variables and data sources are used in the model, Source(s): Calculated by the author on Stata 14, Principal components estimates for sub-indices, Source(s): Calculated by the author using PCA on Stata 14, Principal components estimates for the overall FI index, Estimation of FI Index of high FI level group in developing countries, Source(s): Calculated by the author using PCA method on Stata 14, Estimation of FI Index of low FI level group in developing countries, Correlation between FII and household-based indicator, Source(s): Calculated by the authors on Stata 14, Correlation between FII and index of FI from Park and Mercado, Scoring coefficients for orthogonal varimax rotation (weights), FI indicators of countries by dimension – results of first-stage PCA, Scoring coefficients (weights assigned to zFIIp, zFIIa, zFIIu), Regression estimated results for FII and account, Regression estimated results for FII and IFI from Park and Mercado, Summary of variables and methods of FI measurement from related studies, Banking penetration (p): number of deposit bank accounts per 1,000 adults, Availability (a): the number of bank branches and ATMs per 100,000 adults (using 2/3rd weight for bank branch index and 1/3rd for ATM index), Usage (u): the volume of credit and deposit to adult individuals as a proportion of GDP, Availability (a): the number of bank branches and ATMs per 100,000 adults. For emerging markets and developing economies, excluding China, instead we have a downgrade, with growth projected to be -5.7 percent in 2020 and then rebounding to 5 percent in 2021. Therefore, the economic development of various regions should be promoted in a variety of ways. We can also see that our FI index has a positive and significant correlation at the 5% level for both indices. Bloomberg announced the 2020 Bloomberg Gender-Equality Index (GEI), which includes 325 companies headquartered across 42 countries and regions. Hebei’s GFI is relatively low. The full terms of this license may be seen at http://creativecommons.org/licences/by/4.0/legalcode. Found inside – Page 202(b) The 23rd meeting of the Financial Stability and Development Council (FSDC) ... (c) The report of Human Development Index 2020 was released by the United ... Demirguc-Kunt, A., Klapper, L.F. and Singer, D. (2013), “Financial inclusion and legal discrimination against women: evidence from developing countries”, World Bank Policy Research Working Paper, available at: https://scholar.google.com.vn/scholar?hl=vi&as_sdt=0%2C5&q=Financial+inclusion+and+legal+discrimination+against+women%3A+evidence+from+developing+countries&btnG=>. Read More … (2016) [12] used complex network methods to study the global energy investment structure and found that most foreign investment and foreign investment relations are still controlled by a few Countries. Third, Sarma's technique could be applied in cross-sectional data only (Sarma and Pais, 2008). This paper tries to measure the GFI by the entropy weight method. Honohan, 2008). 135-152. The entropy weight method is used to calculate the GFI of various provinces and cities in China. The rate of sulfur dioxide, the rate of solid waste, and the rate of energy consumption are negative indicators of green finance development. •The second stage of the PCA: By applying the same procedure as described in the first stage, we estimate the weights of the three dimensions and the overall FI index by replacing Yip, Yia, Yiu (were estimated in the first stage) into Equation (1). In terms of the PC structure, we observe that the first component, which accounts for 79.7% of the total variation of the data, is contributed by all three dimensions. Service coverage varies widely across countries. The Human Development Report Office extends its sincere gratitude to the Republic of Korea for its financial support for the publication of the 2020 Multidimensional Poverty Index. Found inside – Page 95[5] IMF (2020), Balance of payments (database), International Monetary Fund, Washington, DC, ... [27] IMF (2019), Financial Development Index Database, ... Green financial industry has the characteristics of long industrial chain, high degree of relevance, and strong absorption capacity, which has a comprehensive pulling effect on economic development and can effectively alleviate poverty. The reason for this relationship may be that increasing government spending exerts a crowding-out effect that inhibits private sector investment activities to a certain extent, causing a decline in private consumption and investment. Apart from Qinghai and Sichuan Province, the GFIs in Northwest and Southwest China are relatively low. Therefore, large time-series panel data increases fatigue in in the case of Sarma's technique, while it increases the efficiency and degree of freedom in the case of PCA technique. 215. http://www.undp.org> (UNDP's Human Development). 1, pp. Lockwood, B. In data selecting and processing for establishing the China’s GFI, relevant indicator data from 2004 through 2017 are used. Figure 1 also illustrates this. •First, based on the ideas of Beck et al. Although there is no consensus on a FI definition, it is generally understood that FI is the process of ensuring that people have easy access to and use of financial services from the formal financial institutions in a timely, adequate, affordable manner, especially for the financial disadvantaged group (Sarma, 2008; De Koker and Jentzsch, 2013; Joshi et al., 2014). In detail, the results from Table A2 – Appendix indicates that the weights are obtained from the information in the PCs and the corresponding eigenvalues. Poverty alleviation requires active adjustment to the credit structure of financial institutions, suitable financial products and services, rational reduction of corporate financing costs, enhancement of regional business environments, support of real economic development, and efficient integration of finance and industry. From literature review, we can see that there are two commonly used approaches to measuring FI through the development of a composite FI index: non-parametric and parametric methods. 2019 MPI landing page The Little Data Book on Financial Development 2015/2016 is a pocket edition of the Global Financial Development Database, published as part of the work on the Global Financial Development Report 2015/2016: Long-Term Finance. Most scholars align themselves with one or more of the following representative views. Some other studies also seek to measure the level of FI by simply measuring the proportion of the adults or households of an economy that has access to formal financial services such as bank accounts (e.g. The Grameen Bank successfully used microloans to help people out of poverty. For optimum experience we recommend to update your browser to the latest version. This study emphasizes the important role of FI in the economy. 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