In this paper, we investigate the status of financial inclusion in the Middle East and North African (MENA) countries and also analyze in detail the determinants of financial inclusion through three main financial inclusion indicators: formal account, formal saving and formal borrowing for Palestine. We benefit from the World Bank Global Findex database conducted in 2014 and employ probit estimation method to analyze the association between individual characteristics and financial inclusion. Results indicate that the main reason for being financially excluded in all MENA countries (except of Bahrain, UAE and Israel) is lack of money. In the manner of borrowing sources; the most used source is family and not financial intermediaries. We find a positive relationship between “GDP per capita” and “percentage of adults with a formal account” in MENA countries. In addition, we observe a positive correlation between “the percentage of GDP growth” and “domestic saving rate”. Furthermore, a positive relationship between “Percent of adults with a formal account” and “Domestic credit to the private sector (percent of GDP)” exist. As for Palestine the research finds that 32% of Palestinian individuals own formal account, 8% hold formal saving account and only 6% used formal credit in the last 12 months. In comparison with other MENA economies, Palestine stands in the middle for owning formal accounts and among the lowest 6 countries in case of using formal accounts. Our estimation model indicates that owning formal account, using formal saving account and formal borrowing is negatively affected by being a female, older age, having lower level of income and incomplete education in Palestine. Moreover, gender, age, income and education affect the source of borrowing where the most used source of borrowing is from family. Our main conclusion is that Palestine individuals, to some extent, have low use of formal services relative to other MENA countries. Political problems, high number of unreachable regions by monetary authority (regions under occupation) and the absence of local currency are highly affecting the financial inclusion situation in Palestine. We believe that relatively low level of financial inclusion have had and will continue to have negative implication on economic growth and poverty alleviation. The findings call for specific policy develo

Conference Title

2nd International Conference on Banking and Finance Perspectives (ICBFP)

Conference Country

Cyprus

Conference Date

April 21, 2017 - April 22, 2017

Conference Sponsor

EMU

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