“Finance has to be inclusive for all the economic agents…”, says Professor Victor Murinde, PI of the Inclusive Finance Project.
According to Stiglitz (2006), the financial system acts as the ‘brain of an economy. Financial institutions and markets promote the dissemination and co-ordination of information about the resource availability at every level throughout the economy, and so they enable an efficient allocation of these resources for supporting economic growth. However, it is not altogether clear how finance can deliver inclusive financial development and growth. Recent empirical research shows that in LICs there are financial development gaps as well as financial inclusion gaps (Allen et al., 2014). In addition, the links between the financial system and economic development have come under increasing scrutiny in recent years, especially following the 2007-09 global financial crisis (Caballero, 2015). The current consensus is that there is an urgent need for research on the role of the finance in fostering inclusive financial development and sustainable economic growth.
Led by SOAS University of London, a consortium of UK and international partners will collaborate on this four-year programme of research. Partner institutions include the Institute of Development Studies at the University of Sussex, Lougborough University, the Overseas development Institute, University of Birmingham and University of Nottingham in the UK, and the Universities of Groningen in the Netherlands, Laval in Canada, and Columbia in the US.
Crucially, the project consortium also includes researchers from institutions in Sub-Saharan Africa, namely the University of Ghana-Legon and the African Economic Research Consortium (AERC) in Kenya, who stand to benefit from the organisational and institutional capacity-building opportunities which underpin the research programme.
The aim of this research is to identify workable policies to help make the financial sector an effective instrument in promoting financial inclusion and sustained growth in LICs, and consequently create an enabling environment for transitioning these countries to middle income status. We will provide a set of answers to ALL THREE critical questions posed in the Call for Proposals concerning,
- the role of international capital flows in growth and development
- the design and provision of institutional frameworks to support financial development
- the ways in which financial system help generate and transmit technical change in the economy as a whole.