TITLE OF THE RESEARCH?

CHAPTER ONE

INTRODUCTION

1.1 Background of the study

In recent years, billionsbillions of individuals globally lacked access to even the most basic
financial resources capable of making future investments and defending their personal
economy. Thirty-one (31%) of adults worldwide are represented by 1.7 billion people in the
world, and at least 200 million small and medium-sized businesses lack access to this
financial tool (Kunt et al, 2017). These people will receive inexpensive financial services
through financial inclusion, which can facilitate and aid people in escaping poverty. Financial
inclusion could therefore be viewed as an instrument that facilitates and accelerates economic
growth, fosters employment, and enhances financial stability (insert reference here).

Financial inclusion, broadly defined as the ability to access to financial services, is expanding
globally but remains a key issue for policymakers worldwide (insert reference here).. In
particular, it is an important public policy goal that directly relates to central banks’ key
objectives and activities (Mehrotra and Yetman (2015)). Financial inclusion can help
maintain economic well-being and lessen poverty. Additionally, it promotes financial,
monetary, and economic stability by improving the efficiency of investment and saving
choices, improving the dissemination of monetary policy, and facilitating the operation of the
economy (insert reference here).. The BIS has hosted several international standard-setting
organizations (SSBs) that have been actively involved with financial inclusion policies for
more than ten years. From the perspective of payments, the current priority is to use payment
systems to promote financial inclusion and access (CPMI, 2016). From a supervisory
standpoint, banks and other deposit-taking institutions' microfinance activities received the
majority of attention. Since then, the focus has been broadened to also cover the full range of
financial products and services that low-income households should be able to access (BCBS
(2015a)).

Information and Communication Technology (ICT) enables the expansion and accessibility
of financial services to groups in emerging nations that were previously underserved (insert
reference here). Transaction expenses are decreased, particularly those associated with
maintaining physical bank branches. ICT tools are being used more frequently in emerging
nations, which has improved financial inclusion by fostering the development of branchless
banking services (insert reference here). Particularly in emerging nations where the costs of
distance and time are relatively high for conventional banking services, the greater access to
financial services for underserved individuals helps close the financial infrastructure gap
(insert reference here). Because of improved information flows made possible by ICT,
depositor data can be used to analyze credit worthiness more effectively and to make deposit
taking easier (insert reference here). Therefore, ICT and mobile devices, in particular,
enhance access to credit and deposit facilities, enable more effective credit allocation, ease
financial transactions, and promote financial inclusion.

In turn, this would encourage private investment and consequently economic expansion.
Assessing whether these programs can in fact promote financial inclusion and subsequently
economic growth is of the utmost importance given the enormous interest in finding new
ways to increase financial inclusion utilizing ICT around the world, such as mobile financial
services (insert reference here). Policymakers and service providers, such as banks, mobile
network carriers, and even microfinance organizations, are eager to expand mobile financial
services quickly. Service providers can fill a void in the financial infrastructure, and
lawmakers can expand the range of financial services available (insert reference here).

According to McKinsey Global Institute (Manyika et al., (2016), digital finance is used in
various financial inclusion programs by providers of financial services that are not only
banks, but other non-bank financial institutions, payment providers, telecoms companies,
financial technology (fintech) start-ups, retailers, and other businesses. One of the key factors
promoting financial inclusion is the simplicity with which financial products and services
may be accessed (accessibility) (insert reference here). Hence, accessibility may be seen
when consumers are close to access points, such as branches, agents, ATMs, outlets, or other
gadgets, making it possible for them to choose and use different financial products and
services to suit their needs (insert reference here).

Understanding how ICT is being utilized for financial inclusion, which has a beneficial
impact on the globe, is important, but it's also important to understand how the ICT tools
used in business and finance are regulated. ICT legislation has aided numerous industries,
including business and finance, in learning and using the tools in a way that has actively
increased their effectiveness and efficiency (insert reference here).
1.2 Problem Statement
Before the widespread adoption of information and communication technologies (ICTs),
financial inclusion was often limited to traditional brick-and-mortar banking institutions
(insert reference here). This meant that individuals without access to physical banking
infrastructure, such as those living in rural or remote areas, often faced significant barriers to
accessing financial services. In many cases, these individuals were forced to rely on informal
financial networks or expensive and often predatory alternatives, such as loan sharks or
pawnshops, to meet their financial needs (insert reference here).

This lack of access to affordable and reliable financial services contributed to the cycle of
poverty and limited economic opportunity for many people (insert reference here). In
addition, traditional banking institutions often relied heavily on physical documentation and
face-to-face interactions, making it difficult for individuals without access to these resources
to participate in the formal financial system (insert reference here). Overall, prior to the
widespread adoption of ICTs, financial inclusion was largely limited to those who had
physical access to banking infrastructure and the resources necessary to navigate traditional
financial institutions (insert reference here).

While the adoption of Information and Communication Technology (ICTs) has the potential
to enhance financial inclusion, there is a need to understand the mediating effect of ICT
regulation on the relationship between ICT adoption and financial inclusion. ICT adoption in
financial services has been identified as a crucial factor for expanding financial inclusion, as
it can help to overcome traditional barriers such as geographic distance, lack of physical
infrastructure, and high transaction costs (insert reference here). The use of digital financial
services such as mobile money, online banking, and e-wallets has increased rapidly in recent
years, providing greater access to financial services for individuals and businesses, especially
in developing countries (insert reference here). However, the regulatory environment for ICT
adoption in financial services varies across countries, and there is a need to understand how
different regulatory approaches impact the relationship between ICT adoption and financial
inclusion. Regulations can create barriers to entry for new players in the market, limit the
scope of innovation and competition, and affect the affordability and quality of financial
services (insert reference here).

Even though other Although researchers have conducted a researchstudies on the impact of
ICT adoption on financial inclusion, this research seeks to examine the impact of ICT
adoption on financial inclusion and the mediating effect of ICT regulation. This requires an
analysis of the regulatory frameworks in different countries, their impact on the adoption and
use of ICT in financial services, and the resulting effects on financial inclusion. This
understanding can inform policy interventions that promote the adoption of ICT in financial
services while ensuring a supportive regulatory environment that enhances financial inclusion

1.3 Research Objectives

The research objectives seeks;seeks.

 To examine the impact of ICT adoption on financial inclusion.

 To examine the impact effect ICT regulation on financial inclusion.
 To examine investigate the mediatingve effect of ICT regulation on the link between
ICT adoption and financial inclusion.

1.4 Research Questions

 What is the impact of ICT adoption on financial inclusion?
 What is the impact of ICT regulation on financial inclusion?
 What is the mediating effect of ICT regulation in the relationship between ICT
adoption and financial inclusion?

1.5 Significance of the Study

The significant of this study is that it adds to existing literature by giving empirical data to
help all stakeholders of the world’s financial sector identify the extent to which the effect of
adoption ICT’s on financial inclusion, as well as offering in-dept knowledge on the mediating
effect on ICTs towards the financial inclusion in general. By distributing the study findings
through publications, stakeholders of the world’s financial sector will be abreast with the
needed standers towards the effect of ICT’s adoption on financial inclusion and also the
mediating effect on the financial inclusion.

The research seeks once again to act as a useful document for the world to help improve the
financial sector with regards to financial inclusion. The gaps and recommendation with
regards to academic work, will provide direction for future improvement in financial
inclusion and ICT’s. The findings will be valuable to the financial sector regulators and other
policymakers in improving regulation.

1.6 Scope of the Study

The study focuses on the investigation of the effect of ICT adoption on financial inclusion
and the mediating role of ICT regulation globally. The study will focus on samples which
provide insights into the relationship between ICT adoption, financial inclusion, and ICT
regulation in contexts where financial inclusion is a significant challenge.
1.7 Organization of the Study
The study will use secondary sources to analyse the relationship between ICT adoption,
financial inclusion, and ICT regulation.

This study is structured into five chapters. Chapter one is the introductory chapter which
presents the background of study, the problem statement, research objectives and questions,
significant and scope of the study as well as how the entire study is organized.

Chapter two outline review and relevant literature. Chapter three present the research
methodology, research design, population, sample size and sampling technique, data analysis
and the summary of the chapter. Chapter four contains data analysis, presentation and
discussion of the research findings. Chapter five presents conclusion and recommendations
suggestions for future studies as well as the limitation of the study.
 CHAPTER 2
2.0 LITERATURE REVIEW

2.1 INTRODUCTION
Financial inclusion has become an increasingly important topic in recent years, both in
academic research and in policy discussions around the world. This literature review will
examine the key concept, theories and empirical evidence related to financial inclusion,
including the various approaches and strategies (such as ICT tools and regulations) that have
been used to promote financial inclusion in different countries and contexts.

2.2 Definition of terms and concepts

2.2.1 Introduction
This sub-section outlines the definition and meaning of key terminologies and concepts as
used in this study.

2.2.2 Terminologies and concepts

 Financial inclusion
According to (Singh & Singh Kondan, 2011), Financial inclusion can be define as the
process ensuring that individuals, households and business in a community has
adequate access to formal financial services and product such as transactions, credit
cards, payments, savings and insurance, and that these are delivered in a sustainable
way. Financial inclusion, broadly defined as the ability to access to financial services,
is expanding globally but remains a key issue for policymakers worldwide. In
particular, it is an important public policy goal that directly relates to central banks’
key objectives and activities (Mahrotra and Yetman (2015)).
 Iinformation and Communication Technology
The Term Information and Communication Technology (ICT) is defined by
(UNESCO, 2006) as forms of technology that are used to transmit, store, create, share
or exchange information. This broad definition of ICT includes such technologies as :
Radio, Television, Vedio, DVD, Telephone (both line and mobile phones), satellite
systems, computer and network hardware and software, as well as the equipment and
services associated with these technologies, such as video conferencing and electronic
mail.
 According to (Mid-pacific ICT center, 2014) is define as “skills around computing
and communication devices, software that operate them, applications that runs on
them, and system that are build with them”.
 ICT adoption
ICT adoption is define as the use of Information and Comminication Technologies
(ICTs) tools including comuter hardware, software, and networks required for
connecting to the internet (Tan et al 2009 and Ghobakhloo et al 2011). Within this
context adoption of ICTs can be describe as a consisting of three define stages
namely, initiation, adoption and implementation as Nguyen (2009), Rogers (2003)
and Thong (1999) observed.
The initiation stage has to do with assessing the ICT innovation. The adoption Stage
is one where a decision is made to adopt an ICT innovation. The Implementation
stages is concern with effecting the ICT innovation in the system.
This implies that ICTs are used productively and enhances the operations of financial
services globally.
 ICT regulations
ICT regulations refers to the set of rules, policies and laws governing the use,
development, and distribution of information and communication technologies (insert
reference here). ICT regulation can cover a wide range of areas, including internet
governance, data protection, cyber security, telecommunication, E-commerce, and
intellectual property right (insert reference here).

2.3 Ooverview of financial inclusion

Financial inclusion refers to the availability of practical and reasonably priced financial goods
and services for individuals and enterprises that meet their needs for transactions, payments,
savings, credit, and insurance that are provided in a sustainable and responsible manner
(insert reference here). Seven of the 17 Sustainable Development Goals have been linked to
financial inclusion as an enabler. The G20 vowed to promote financial inclusion on a global
scale and reaffirmed its commitment to put the G20 High-Level Principles for Digital
Financial Inclusion into practice (insert reference here).

Financial inclusion is viewed by the World Bank Group as a crucial tool for reducing extreme
poverty and fostering shared prosperity (insert reference here). Having access to a transaction
account is the first step toward greater financial inclusion because it enables people to keep
money and send and receive payments. The World Bank Group (WBG) continues to put
emphasis on making sure that everyone may access a transaction account because it acts as a
portal to other financial services. It was particularly important since it was the focus of the
World Bank Group's Universal Financial Access 2020 effort, which came to a conclusion at
the end of 2020. The fact that there is still more work to be done, despite the fact that this
campaign has resulted in many successes, shows the size of the task (insert reference here).

Daily life is made easier by having access to money, which also helps families and businesses
prepare for everything from long-term objectives to unanticipated emergencies (insert
reference here). Account holders are more likely to use additional financial services like
credit and insurance to launch and grow enterprises, make investments in their children's or
own health or education, manage risk, and recover from financial setbacks, all of which can
enhance their overall quality of life (insert reference here).

The need for greater digital financial inclusion has been furthered by the ongoing COVID-19
dilemma (insert reference here). Digital financial inclusion entails the use of cost-effective
digital means to provide populations that are currently underserved and financially excluded
with a variety of formal financial services that are responsibly delivered at a cost that is
affordable for customers and sustainable for providers (insert reference here).

FI has attracted the attention of the entire globe over the years in several talks on the global
economy and development finance. This emphasis on FI can be attributed to its recognized
ability to spur economic growth and guarantee an economy's sustainability. According to
Onaolapo (2015) and Uma et al. (2013), FI refers to a procedure that makes it simple,
practical, and economical to open a bank account. Additionally, it was stated that FI acts as a
benchmark to gauge how formal financial services are accessible to the average person in
each economy. FI is also described as a careful effort that enables persons who fall into the
categories of being marginalized, poor, or vulnerable to having below-average economic
power to participate in formal economic processes and have regular access to and usage of
formal financial services. a situation in which every member of society has equal access to
and opportunity to use financial products that will help them manage their finances and
businesses. Businesses employ FI as a tool to take advantage of fresh business chances that
could eventually boost their income (Uruakpa et al. 2019). FI (Soyemi et al., 2020) is the
practice of providing financial services to the underprivileged, vulnerable groups, and all
adults in society.

According to (insert reference here), 1.2 billion adults globally gained access to an account
between 2011 and 2017, demonstrating significant progress toward financial inclusion.
Adults worldwide had accounts as of 2017 to the tune of 69%. More than 80 nations have
now started digital financial services, with some of them achieving significant size, notably
those requiring the use of mobile phones. Because of this, millions of previously uninsured
and underserved low-income consumers are switching from only using cash for formal
financial transactions to also using mobile phones or other forms of digital technology.

For nations (China, Kenya, India, Thailand) where at least 80% of the populace has accounts,
the next stage is to move from having access to using accounts. These countries relied on
reforms, private sector innovation, and a push to open low-cost accounts, including mobile
and digitally-enabled payments.

However, the most recent Findex data (data for 2021 to come) show that about one-third of
adults, or 1.7 billion, were still without a bank account in 2017.Women from low-income
rural households or those who are unemployed made up about half of the unbanked
population.

In developing countries, the gender disparity in account ownership remained constant

between 2011 and 2017, at 9 percentage points, making it difficult for women to successfully
manage their finances. Less gender inequality was observed in countries where the use of
mobile money was widespread. It remains to be seen how the COVID-19 will affect this
gender discrepancy.

Since 2010, more than 55 nations have committed to promoting financial inclusion, and more
than 60 have started to build national strategies. The nations that have made the most
headway in promoting financial inclusion are: More than 1.2 billion residents were covered
by leveraged government payments thanks to policies like universal digital ID-India and
Aadhaar/JDY accounts. (For instance, 35% of people in developing nations getting
government assistance established their first bank account for this reason.) gave rise to the
success of mobile financial services. (For instance, in Sub-Saharan Africa, the share of people
with mobile money accounts increased from 12% to 21%).

Welcomed new business models, such as leveraging e-commerce data for financial inclusion
Taking a strategic approach by developing a national financial inclusion strategy (NFIS)
which bring together diverse stakeholders including financial regulators, telecommunications,
competition and education ministries Paying attention to consumer protection and financial
capability to promote responsible, sustainable financial services.

When countries take a strategic approach and develop national financial inclusion strategies
which bring together financial regulators, telecommunications, competition and education
ministries, our research indicates that when countries institute a national financial inclusion
strategy, they increase the pace and impact of reforms.
2.3.1 History and evaluation of Financial Inclusion
Financial inclusion has a long history, dating back to the 19th century when cooperative
banks were established in Europe to provide financial services to the unbanked population. In
the 20th century, microfinance institutions emerged in developing countries, offering small
loans and other financial services to the poor. The concept of financial inclusion gained
momentum in the early 21st century, as policymakers and international organizations
recognized the importance of providing access to financial services to promote economic
growth and reduce poverty.

Since then, many countries have implemented financial inclusion policies and initiatives to
increase access to financial services. For example, India launched its Jan Dhan Yojana
program in 2014, which aimed to provide a bank account to every household in the country.
In Kenya, the M-Pesa mobile money platform has enabled millions of people to access
financial services using their mobile phones.

The impact of financial inclusion has been evaluated in many studies, with varying results.
Some studies have shown that financial inclusion can promote economic growth, reduce
poverty, and increase financial stability. For example, a study by the World Bank found that
access to financial services can help reduce poverty by providing a pathway to economic
empowerment. Another study by the McKinsey Global Institute found that financial inclusion
could add $3.7 trillion to the global economy by 2025.

However, other studies have found that the impact of financial inclusion can be limited,
particularly if the financial services provided are not tailored to the specific needs of low-
income individuals and marginalized communities. For example, a study by the Consultative
Group to Assist the Poor found that many microfinance institutions failed to provide financial
services that were appropriate for their clients, leading to high levels of debt and financial
exclusion.

2.4.1 Benefits of Financial Inclusion

Financial inclusion has gained support from national and international policymakers as a
crucial development goal. The subject was one of the G20's pillars at the Pittsburgh Summit
in 2009 (G20 2009). More than 50 national regulatory and policy-making authorities had
publicly committed to financial inclusion policies for their nations by the fall of 2013 (World
Bank 2013a, AFI 2013). And the World Bank Group proposed the global objective of
universal access to basic transaction services in October 2013 as a significant step toward
achieving full financial inclusion—a world in which everyone has access to and can use the
financial services he or she needs to seize opportunities and lessen vulnerability (World Bank
2013b).

 Economic growth: Financial inclusion plays an important role in economic

development, especially in terms of GDP growth and in reducing inequality and
poverty in any country. The flexibility of financial inclusion is difficult to measure
as it improves the ability of low-income families to access finance. Furthermore, firms
and households can also have the opportunities to boost their income and
self-reliance, positively affecting the economic development of a country. Being
unable to access formal financial products and services may result in a loss
of development opportunities, further poverty and cost to access.
A country with a developed financial system that is accessible to people can reduce
the cost of information and transactions. Such a system will have impacts on savings
and the long-term growth rate, investment decisions, and technological innovation.
Andreoni et al. (2008, pp. 13–14) said that being unable to access financial services
strongly correlates with financial exclusion, which is related to poverty and
inequality. In other words, a person or a region will be excluded in society if they are
unemployed, lack skills, have a low income, are poor, or have an unstable
surrounding environment or bad health. All of the above problems can result in family
depression. Consequently, social disparity becomes more extreme, the rich become
richer, the poor become poorer, and national economic development is affected.

ACCESS
(ATM)

Financial Inclusion EFFICIENCY Economic Development

STABILITY
 Poverty reduction: Financial inclusion can help reduce poverty by enabling low-
income individuals to access credit and other financial services, which can empower
them to start businesses, invest in education, and improve their standard of living.

Due to the pervasiveness of extreme income disparity, which is seen as a serious

threat to the decrease of poverty, in developing regions, the rate of poverty reduction
is slowing. For many nations, reducing poverty is a top priority. According to the
World Bank's projection in Poverty and Shared Prosperity 2020: Reversals of Fortune,
the recent Covid-19 pandemic will cause an additional 150 million people to live in
extreme poverty. Finding policy tools to combat poverty is essential given the current
rise in poverty. Financial inclusion is one such policy instrument. To this purpose, the
World Bank established objectives to reduce income inequality and increase shared
prosperity for the bottom 40% of people in each country by 2030.
Financial inclusion, according to randomized research by Demirguc-Kunt et al.
(2017), Aker et al. (2014), and Babatz (2013), decreases poverty by granting access to
payment, savings, credit, and insurance services. Studies conducted across nations by
Park and Mercado (2018), Swamy (2010), and Omar and Inaba (2020) show a link
between financial inclusion and poverty that is unfavorable. Recent research, such as
those by Kara et al. (2021) and Aslan et al. (2017), suggests that the unequal access to
financial services may have an impact on the effectiveness of financial inclusion as a
policy instrument.

 Financial stability: When more people have access to financial services, the overall
financial system can become more stable, as people are better able to manage
financial shocks and unexpected expenses.
An growth in non-performing loans (NPLs) from 6.5% in 2014 to 12.72% in 2020
appears to have put the region's bank stability in danger over the period. The ability of
banks to enhance financial intermediation may be hampered by the rise in non-
performing loans. Non-performing loan levels that are high and on the rise might
strain bank balance sheets, impact lending activities, and restrict banks' ability to
expand financial intermediation (Laib and Abadli 2018). Banks may reduce lending
and demand collateral from borrowers even for small loans as a result of the rise in
NPLs, which could result in disintermediation of the economy. NPLs can also impact
bank operations and reduce industry profitability by requiring more provisioning.
However, Bank Z-Score indicates otherwise because the values have increased over
the same period.
76% of adults now have a bank or mobile account, up from just 51% in 2011.
 The cost of remaining outside the financial system is high, so this is crucial. Without a
bank, money cannot be deposited and safeguarded, nor can interest be accrued.
However, a sizable portion of adults in poor countries lacked an account until
recently. But according to the World Bank, inclusion is currently growing quickly.
Between 2017 and 2021, account ownership in developing economies increased from
63% to 71%, spurred by services like mobile money.

 Gender equality: Financial inclusion can help promote gender equality by enabling
women to access financial services, which can help them start and grow businesses,
gain greater control over their financial lives, and become more financially
independent.
 Improved financial literacy: Financial inclusion can help improve financial literacy, as
people are able to access the financial tools and resources, they need to make
informed financial decisions.
 Reduced inequality: Financial inclusion can help reduce economic inequality by
providing access to financial services to those who have historically been excluded
from the financial system, such as low-income individuals and marginalized
communities.

2.4.2 Challenges of Financial Inclusion

The empirical results demonstrate that obtaining financial access is significantly influenced
by financial expertise. For total financial access, some factors are very important, including
profession, income level, education level, familiarity with depositing and withdrawing
money, and familiarity with interest rates. However, due to the low response rate in every
situation, training on various services is irrelevant. Rural residents typically aren't aware of
financial service training.

The fact that financial literacy is in high demand right now is reflected in this study (Berry et
al. 2018; Frisancho 2019; Lusardi et al. 2019; Opletalová 2015; Postmus et al. 2013; Urban et
al. 2018). Knowledge about financial services is receiving significant attention from
researchers, government officials and educators, as well as policymakers. It will substantially
add to the body of knowledge in the fields of inclusive finance, rural development, financial
literacy, economic development, banking, and microfinance.

 Financial literacy and banking access

Financial literacy is regarded by various national and international organizations as
one of the key components of financial inclusion since Kou et al. (2021) recognized
access to finance as a difficulty. Economically vulnerable groups have a significantly
lower likelihood of being included into the financial institutions, according to Lyons
and Kass-Hanna's research from 2019. Additionally, those with greater levels of
financial literacy are more likely to practice good saving habits and are less likely to
borrow from various unofficial sources. People who are financially literate are better
equipped to assess a range of financial products and services. With a focus on social
capital, Bongomin et al. (2016b) questioned the effect of financial literacy on
financial inclusion. As a result of social capital's full mediation, the results
demonstrated that financial literacy indirectly increased financial inclusion.
Financial literacy and microfinance
Nawaz (2015) put a strong emphasis on financial education and women's
empowerment. Women who have sufficient financial literacy skills and can manage
their money properly and efficiently can achieve a suitable level of socioeconomic
empowerment. They typically benefit from training courses provided by various
microfinance organizations. Numerous NGOs provide their account holders with a
variety of training programs. Through this financial literacy course, women can have
a better understanding of how to handle money in productive ways, including
maintaining bank accounts, using money wisely, and advising their husbands and
other family members on various economic activities. The ladies can take charge of
their families' overall financial position. Ultimately, the author came to the conclusion
that all microfinance programs needed to include a financial training component.
Budgeting, saving, debt management, and bank services were the four main themes in
Bijli's (2012) analysis of financial literacy in relation to microfinance.
Financial literacy and FinTech usage
 Rural residents' access to finance is greatly facilitated by financial technology. When
customers are unable to access financial services, mobile banking serves as a backup.
They are highly eager to engage in financial communication because it is widely
available and relatively simple to obtain (Hasan et al. 2020b). Because of the
expanding use of technology, Brown and Slagter van Tryon (2010) cited financial
education as one of the most well-known financial and economic words of the twenty-
first century. In this instance, finding innovative methods to use cutting-edge financial
systems required technical training. Every form of financial communication in the
twenty-first century is built on technology, which necessitates both financial and tech
knowledge. According to Shen et al. (2019), financial literacy had a key role in
closing the gap between high internet usage and low financial management utilization.

2.4.3 Benefits of ICT Regulation

Information and Communication Technology (ICT) regulation can play a significant role in
promoting financial inclusion. The introduction of Information and Communication
Technology (ICT) regulation can have several benefits for financial inclusion. Here are some
ways that ICT regulation can benefit financial inclusion:

 Improved access to financial services: ICT regulation can lead to increased access to
financial services, especially for people who live in remote or underserved areas. As
Ndukwe (2016) notes, ICT regulation can "facilitate the expansion of financial
services to remote and underserved areas, improving access to finance for the
unbanked and underbanked."
 Reduced transaction costs: By facilitating electronic transactions, ICT regulation
can help to reduce transaction costs for consumers and financial service providers.
This, in turn, can help to make financial services more affordable and accessible for
low-income individuals and small businesses. As Garcia-Sanchez and Garcia-Murillo
(2013) note, "ICT regulation has the potential to reduce transaction costs, which is
key to making financial services more accessible to low-income populations."
 Increased efficiency: ICT regulation can also help to increase the efficiency of
financial services, reducing the time and resources needed to carry out transactions.
This can be especially important for small businesses and low-income individuals
who may have limited resources to devote to financial management. As Turek et al.
(2019) note, "ICT regulation can help to streamline financial transactions, reducing
costs and increasing efficiency."
 Improved transparency: ICT regulation can help to increase the transparency of
financial services, making it easier for consumers to understand the terms and
 conditions of financial products and services. This can help to build trust in the
financial system and encourage greater participation by low-income individuals and
small businesses. As Berhane and Asfaw (2015) note, "ICT regulation can enhance
transparency, which is key to building trust and increasing participation in the
financial system."
 Enhanced security: By providing guidelines for the use of ICT in financial services,
ICT regulation can help to enhance security and reduce the risk of fraud and
cyberattacks. This can be especially important for low-income individuals and small
businesses who may be more vulnerable to financial fraud. As Kshetri and Dholakia
(2010) note, "ICT regulation can help to enhance security, which is essential for
building trust and ensuring the safety of financial transactions."
 Increased innovation: ICT regulation can help to stimulate innovation in financial
services, leading to the development of new products and services that are better
suited to the needs of low-income individuals and small businesses. As Dalberg
(2013) notes, "ICT regulation can foster innovation, enabling the development of new
financial products and services that are tailored to the needs of underserved
populations."

2.4.4 Challenges of ICT Regulation

There will be difficulties in achieving financial inclusion using ICT. Even while mobile
banking and money are more widely available than ever, there is still room to expand to
underserved populations, particularly rural consumers. Despite increased awareness of the
value of an enabling regulatory environment, regulatory restrictions continue to be an
obstacle. In December 2015, there were 51 of the 93 countries where mobile money was
available. This is an increase over 2014, when there were enabling regulations in 47 out of 89
countries.

Despite the many advantages and potential uses of ICT, there are still certain obstacles in the
way of their goal of achieving complete financial inclusion. Some of these issues are fairly
serious and persistent, while others are obvious signs of structural flaws. But these obstacles
must be overcome in order for complete financial inclusion to become a reality rather than a
mirage. Policymakers and other stakeholders need to take into account the following issues in
their attempts to make financial services accessible to everyone through technology.

 Limited access to electricity or telecommunications: Power outages and a shoddy

telecommunications network are still major problems, even in urban areas. Currently, the
majority of businesses and people produce their own electricity. These are significant
 problems that will probably limit financial inclusion, at least in the short- to medium-
term future.

 High cost of connectivity in the face of increased poverty: The current situation makes
it difficult for many individuals to meet their fundamental necessities, including those for
clothing, food, shelter, and healthcare. Therefore, they are unable to afford even the
expensive price of buying smart phones, let alone paying for ongoing internet
connections. It is well known that internet connectivity is not inexpensive. As a result,
many people will likely continue to be financially excluded because they cannot afford
web connectivity, according to the present pattern of rising poverty rates and high
internet access costs (Yun & Opheim, 2010; Arugu & Chigozie, 2016).

 Lack of basic education and ICT skills: Illiteracy and the increasing out-of-school
syndrome are major problems for some nations right now. One cannot properly utilize,
service, or maintain ICTs, or benefit from the contemporary financial products and
services offered through various ICT platforms, though, without a minimum education
and technical know-how. For ICT facilities to be used effectively, literate and skilled
labor is required, particularly in the present, when the quick adoption of new
technologies and other inventive developments has become the norm. The result is that
because of illiteracy and a lack of ICT skills, a sizable portion of the population will
likely continue to be financially excluded (Ogbuabor et al., 2017). Age-related exclusion
of specific demographic segments from the system is a result of the ICT industry's rapid
growth and acceptance.

 High prevalence of fraud and weak cyber security: Because of the high prevalence of
fraud and general lack of cyber security, many people are reluctant to use ICT platforms.
The enormous sums of money that banks and other financial organizations lose each
fiscal year due to fraud serves as more evidence of this attitude. The less fortunate
element of this circumstance is how little compensation is given to those who fall victim
to banking system fraud. Therefore, the vast mass of the population—which is also
largely ICT illiterate—would rather remain underground than accept the ICT-driven
financial system. Due to this difficulty, a sizable portion of people will probably continue
to live in financial exclusion for some time.

 Poor justice system and/or legal framework: According to Ogbuabor et al. (2014), the
current institutional systems for upholding contracts and rights of individuals and
businesses appear to be rather weak, onerous, and unworkable. Once more, the financial
and time costs of seeking legal remedies are terrifying. The laws governing electronic
 transactions are still developing, but it is envisaged that the legal system will be able to
quickly and confidently settle disputes resulting from transactions made on ICT
platforms. The difficulty of the weak legal system may certainly keep many people
outside the financial sector until then.

 Digital divide between urban and rural areas: the current scenario in which the
majority of contemporary facilities that have the ability to raise peoples' standards of
living are typically concentrated in metropolitan areas while rural towns are typically
ignored. The younger generation is not motivated to dwell in rural areas by this
condition. In fact, this phenomena may be largely responsible for the high rate of ICT
illiteracy among rural residents. There are language obstacles when conducting financial
transactions using mobile phones because the bulk of cell phone applications are created
in foreign languages and the majority of unbanked communities that own cell phones
reside in rural areas with high rates of illiteracy. This rural population may continue to
be financially excluded unless effective measures are put in place to change the situation,
as is expected.

 Low level of ICT investment: Compared to highly industrialized economies, ICT

investment is still low. Finding the ideal balance of private and public resources to
improve publicly available information bases is a significant challenge facing developing
economies, according to Chetley (2006). The majority of governmental and private
institutions lack adequate ICTs. For instance, the banking sector has continued to have
significant challenges in delivering and maintaining adequate Automated Teller
Machines (ATMs) that can service the banking public at all times. Due to lack of a
mobile device (more than 310 million individuals still do not own a basic feature phone
or a smart phone) or financial institutions choosing not to send these messages for low
value transactions, SMS notifications for account transactions are not reaching the client.
Due to this, there is now a greater reliance on human financial transactions. The use of
ICTs to promote financial inclusion will continue to be a "tall dream" until a clear plan is
put in place to support investments in the ICT sector.

 Other obstacles include; a lack of public-private partnerships to promote the

development of ICT facilities and skills, a lack of sufficient bandwidth to ensure faster
access to resources, and a large number of outdated ICT devices, such as old mobile
phones that are not internet-enabled (Yun & Opheim, 2010; Arugu & Chigozie, 2016).
2.5 Theoretical review
The operational effectiveness of financial markets and the usability of financial services are
enhanced as a result of the mutual penetration and deep integration of ICT and the traditional
financial industry, fostering the growth of financial inclusion through the following specific
channels:

Improving the coverage of financial services. Traditional financial institutions need to expand
their institutional outlets to provide more coverage, but because to their high cost, it is
challenging for them to reach economically depressed areas. The rise of mobile phones,
according to Andrianaivo and Kpodar (2012), has a substantial impact on the continent of
Africa's economies. Utilizing ICT has improved the bank's capacity to carry out financial
transactions whenever and wherever they are using a computer or mobile device, which can
save time and money by removing the need to go to a physical branch (Lenka and Barik,
2018).

However, the impact of ICT on financial inclusion is not automatic or guaranteed. Regulatory
frameworks play a crucial role in shaping the outcomes of ICT adoption in the financial
sector.

ICT regulation can act as an enabler or a barrier to financial inclusion. Effective regulation
can create an enabling environment that promotes competition, innovation, and consumer
protection. It can ensure the stability and integrity of digital financial systems, safeguarding
consumers' trust and confidence. According to Demirgüç-Kunt et al. (2018), in order to reap
the benefits of digital financial services, it is necessary to have a well-developed payments
system, adequate physical infrastructure, proper legislation, and robust consumer protection
safeguards.

Financial organizations may effectively gather and analyze consumer data, forecast customer
preferences and needs, and create and offer more customized financial solutions to customers
by relying on the advancement of information technology. Jenkins (2008) provides evidence
for how cutting-edge ICT might enhance trade by reducing transaction costs.

Promoting the development of financial technology (FintechThe foundation of digital finance

and fintech development is general information technology. Information and communication
technology has recently encouraged the use of big data, blockchain, artificial intelligence, and
other developing technologies in domains connected to finance. As a result, fintech has
quickly risen to prominence. The emergence of Fintech helps traditional financial institutions
mine information, reduces information asymmetry between financial institutions and SMEs,
and lessens the financial constraints faced by SMEs. As a result, financial institutions are now
more operationally efficient and are able to offer a wider range of financial services.
According to the World Bank (2012), mobile phones are available to three-quarters of the
world's population, and the poor in emerging and developing nations use them often.

According to the McKinsey Global Institute study, financial inclusion can increase emerging
economies' production by $3.7 trillion in 2025 and reduce the cost of financial services by
80% to 90%. Digital/mobile banking will probably improve with better cooperation between
the government, telecommunications companies, and financial institutions (Ozili, 2018).

2.6 Hypotheseis Development

2.6.1 ICT adoption and Financial Inclusion:

This hypothesis posits that there is a positive relationship between ICT (Information and
Communication Technology) and financial inclusion. It suggests that the adoption and usage
of ICT tools, such as mobile banking, digital payments, and online financial services, have a
direct impact on improving financial inclusion. By leveraging ICT, individuals can access
financial services more easily, conduct transactions, and manage their finances, thereby
reducing barriers to financial inclusion.

H1: The adoption and usage of ICT in the financial sector positively impact financial
inclusion outcomes.

2.6.2 ICT adoption and ICT Regulation:

This hypothesis explores the relationship between ICT and ICT regulation. It suggests that as
ICT adoption and usage increase, there is a need for corresponding ICT regulations to govern
and guide the use of these technologies in the financial sector. Effective ICT regulation can
ensure the security, privacy, interoperability, and ethical use of ICT tools and platforms. It
also promotes consumer protection, fair competition, and trust in digital financial services.

H2: ICT regulation guide and govern ICT tools

2.6.3 ICT Regulation and Financial Inclusion:

This hypothesis examines the relationship between ICT regulation and financial inclusion. It
suggests that the quality and effectiveness of ICT regulation have an impact on the level of
financial inclusion. Well-designed and supportive ICT regulations can create an enabling
environment for the development and expansion of digital financial services, leading to
increased access to financial products and services for underserved populations. Conversely,
inadequate or restrictive ICT regulation may hinder the growth of digital financial services
and impede financial inclusion efforts.

H3: ICT regulation positively impact financial inclusion outcome

ICT H1

FI
H2

ICT R H3

Figure (). Research Model of the Study

Key: ICT - Information and Communication Technology, ICT R - Information and

Communication Technology Regulation, FI – Financial Inclusion.

2.7 Chapter Summary

Highlights of financial inclusion were included in this chapter. It provides information about
financial inclusion history and evaluation. The chapter also includes benefits and challenges
of financial inclusion as well as benefit and challenges of ICT regulation on financial
inclusion. Theoretical review were also included in this chapter hypothesis development were
also included showing, positive impact of ICT on financial inclusion (H1), ICT regulation
govern and guides ICT tools (H2) and positive impact of ICT regulation on financial
inclusion.