Research studies

The Role of Digital Technology in Stimulating Financial Inclusion


Prepared by the researcher   – Dr.  Eman kadhim abbas, Wasit University College of Law

Democratic Arab Center

International Journal of Economic Studies : Twenty-Second Issue – August 2022

A Periodical International Journal published by the “Democratic Arab Center” Germany – Berlin

Nationales ISSN-Zentrum für Deutschland
ISSN  2569-7366
International Journal of Economic Studies

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The study aims to show the impact of the use of financial digitization technology, which is represented by electronic payment methods (credit cards, electronic debt, and atm) on the reality of financial inclusion in Iraq. He outlined the importance of the digital transformation in banking by providing financial services. This has to do with the level of digestion and the volume of investment in the Iraqi economy. The researcher has reached the existence of a relationship and importance of digital technology in accelerating the process of electronic transformation and the size of financial inclusion and the absence of a financial and banking culture in the public


The world has witnessed major revolutions and transitions in technology and a major shift in the field of financial and banking services, communications and the Internet, where digital transformations have played the role of intermediary between individuals and the government or between the client and the companies of finance and business. This has led to a significant development in financial services and a diversity of technological products that are outrageous about changing individual demand and moving towards digital financial transformation. This  transformation has made the world a small region one of the pillars of innovation and technical progress, which has accelerated the process of financial inclusion at the global level, where innovation in the financial and banking sector has been a boom in financial systems at the global and Arab levels, represented by a package of financial services that include banking services, banking services, financial transformation, lending, insurance and digital currencies. Several studies have been submitted in this regard

The problem of research: – Due to the global importance of the process of northern inclusiveness and the trend of the world to digital transformation and the use of digital technology in the financial sector is the problem of research in answering the following question what is the role of financial technology in promoting the process of financial inclusion?

The importance of research: – Financial inclusion is one of the reasons for sustainable development and a key factor in stimulating economic growth, while benefiting from the role of financial technology in integrating all groups of society, especially those with limited and middle income and the women’s segment, this will be a great incentive to provide resources, maximize wealth and promote the process of financial inclusion.

Research objectives: – The research aims to clarify the role and what digital technology is and to show its importance in promoting the role of financial inclusion

The research method: – The researcher used the inference in the study of what financial inclusion and financial technology is completed and used the inductive approach in demonstrating the role of technology in moving the wheel of financial inclusion at the global, Arab and local levels.

  First: The concept of financial inclusion, its importance and its development

The term financial inclusion emerged when the cooperative  movement emerged in India at the beginning of the 1990s, against non-institutional lending cases consisting of financial lenders that received high interest from peasants (Ezz, 2012), and then developed more broadly during the 1990s, a study by Leshon and Travette on financial services provided by a bank in south-east England, where one of its branches was closed and the population was unable to access banking services in 1993.  In 1999, the term financial inclusion was used more broadly to identify challenges preventing people from accessing financial services (Abdullah, 2016), and then began to pay attention to financial inclusion in early 2000 in developing countries, if there were many international appeals by financial institutions and international organizations to highlight the policy of financial inclusion by expanding the diversity of banking financial services to all segments of society. All kinds of financial services and the latest technology frameworks If the financial inclusion network, which organizes the membership of 94 countries represented by (119) financial institutions, is formed and the subject of financial inclusion is of great importance to the world, where many meetings and meetings were held represented at the Summit of Pittsburgh in September 2009, if the group of financial inclusion experts was established and then nine basic principles of financial inclusion were identified according to the recent digitization in 2010 at the Toronto Summit,  In the same year, financial inclusion was formally recognized as one of the pillars of global development and this commitment was reinforced after a survey showed that more than 2 billion adults were excluded from financial services, and in 2013 the World Bank Group launched the Global Programme and utilized innovations to popularize public services in a variety of ways (Global, 2011).

The concept of financial inclusion

The definition of financial inclusion of researchers and their names differed, but it unites through substance and content, and the multiplicity of concepts by specialists in financial institutions, known as the access of individuals to all services in a soft way, also known as the access of individuals and small enterprises to all financial services (Bernie, 2019), and according to the World Bank definition of financial inclusion issued in 2014 in the Global Financial Development Report as the percentage of people or companies using financial services (Abdullah, 2016).

Financial inclusion is the ability of adult individuals to access a full range of high-quality and affordable financial services, including the poor, people with special needs, villages and rural areas) as defined by the Financial Inclusion Centre in Washington (The World Bank Group, 2014). According to the 2017 Joint Report of the International Monetary Fund (IMF) and the Advisory Group on The Help of the Poor, individuals and companies have access to a wide range of financial services.  Meet their needs and suit their standard of living (Shanabi Surya, 2018). The Organisation for Economic Co-operation and Development (OECO) and the International Financial Education Network (INFE) defined financial inclusion as “the process in which access to all official financial services and products is enhanced in time and appropriate costs. Finally, the Central Bank of Iraq defined financial inclusion in iraq’s financial inclusion plan for the years (2020-2018) as “access to financial and banking services and products available to all individuals and at the most appropriate costs, contributing to financial and economic sustainability” (Iraqi Center, 2018). To promote a broader, broader definition and an internationally unified concept, the Global Financial Inclusion Alliance Financial Inclusion Group has identified a set of foundations to be provided in the Financial Inclusion Data Working Group, 2011.

  1. Ensure unit measurement and comparability
  2. Choose the most appropriate indicators that achieve financial inclusion policies
  3. Rely on available data to save effort and cost
  4. Balancing the supply and demand sides when addressing financial inclusion
  5. Achieving financial inclusion varies from country to country because of the different factors affecting it, so flexibility must be provided in calculating the financial inclusion index in each country.

The importance of financial inclusion

The issue of financial inclusion is attracting the attention of many researchers, decision makers, policymakers and financial stakeholders in various sectors, and financial inclusion is a program or resource that meets many of the specific needs of individuals such as deductions, signatures, investments, many grants and financial opportunities, and the response to shocks and random and regular emergencies (Allen& Gale, 2012). Studies have shown that there are development benefits that financial inclusion can bring.  Especially financial technology applications that provide financial services via mobile phones and payment cards (Demirgoch, 2017).

Financial inclusion targets

  1. Achieving financial sustainability.
  2. Establishing many financial institutions that provide low-cost financial services
  3. Spreading cultural awareness of the benefits and benefits of digital-based financial services
  4. Creates jobs and jobs for the unemployed
  5. Helps people save their money and are able to achieve savings and form.
  6. Remove barriers to supply and demand for digital financial services and products.

Challenges and constraints

Despite the support of international financial institutions for expanding financial coverage and developing special strategies, there are obstacles to the spread of financial coverage in such a way that the vast majority of individuals can benefit from all available financial services. Among these constraints are:

  1. Supply side challenges for the number of institutions providing financial services in poor areas with poor infrastructure and technology required promoting financial and service realities and the weakness of the private sector in providing services at the lowest cost, the cost is often high and financial institutios are poorly aware of the importance of financial inclusion (camara, 2014).
  2. Demand side challenges one of the most important challenges is not to save by the public and this increases the rate of inflation, and the proportion of the population below the poverty line directly affects the breadth and spread of financial coverage. So there is an inverse relationship between increased poverty rates and the size of financial coverage, on the other hand, different wage levels between the private sector and the public sector, which has made many workers financially excluded (Rajab, 2018).
  3. Legal challenges of the lack of explicit laws and legislation that protect customers and are limited to the existence of instructions only.
  4. The risks of identifying the customer.
  5. Lack of regulatory and supervisory environment.

Secondly: Financial inclusion policies

Interest and pursuit of financial inclusion did not appear after the 2008 global crisis, but the awareness of regulatory institutions to achieve financial inclusion increased in the wake of this crisis, until this was evident in their commitment to implement policies to promote and facilitate access to financial services for individuals and all segments of society, including the financially excluded.

These institutions have motivated service providers to innovate, introduce modern technologies, diversify their services and sustain whenever they reduce cost and ensure that services reach low-income groups. Because of a gap in legal and regulatory legislation, financial institutions have worked to pass legislation that guarantees justice, transparency and consumer protection for these services (Haning&Janson, 2010). Six financial inclusion policies can be identified, four of which ensure that financially excluded groups have access to financial services and others that enable the expansion and spread of financial inclusion.

1-Banking Agency: –

A contract between the agent and the client has proved to be a great success between the banks and non-bank pos if to achieve the goal of financial inclusion must be expanded by point of sale and not limited to bank branches, so that supermarkets, post offices and libraries become agents of banks and financial coverage as well.

2-Pay through the mobile wallet: –

The mobile wallet means mobile communication devices, which have become a tool for storage and conversion and have had the greatest impact in third world countries and countries with traditional infrastructure and contributed significantly to the spread of financial services (Arab Monetary Fund, 2013).

3-Diversity and multiplicity of financial services

If technology opens the way for decision makers to make policies and plans for crisis management and licensing risks (Haning&Janson, 2010).

4.The significant expansion of electronic services in the introduction of many innovative financial offers that contain a high risk ratio may be outside the consumer’s awareness and capabilities to make the right decision according to the foundations studied, so organizations should be aware of the need of the consumer and design the offers and products in line with his need and potential (Al Hashal, 2015).

5-Customer Identity Policy

He answers that the financial identity is characterized by controls, for example, by the customer’s passport or personal status card, which ensures that there is no problem with remittances made by financial service providers.

6-The policy of adapting government banks is often the only institutions in rural areas and villages, so they must play a role in promoting savings, investment and access to financial services (Haning&Janson, 2010).

Thirdly: Financial Technology 

Technological development is one of the most important pillars in the progress of the financial, banking and telecommunications sector, where Booz recently directed the vast majority of customers to use the latest digital applications and use smart solutions in their transactions. Financial technology has the ability to bring about real changes in the structure of financial services by making financial services delivered transparently and in faster, less expensive and safer ways (Bank, 2018), and digital transformation under new technology and innovations is an urgent necessity to keep pace with electronic development, transformation of traditional services, reduce mistakes, cost and separate citizens from service providers by moving to digital services to reduce corruption, bribery and rationalization of spending (Hazel, 2021). Despite the support of international institutions for the digitization of public finances, this change and development is swinging between acceptances and waiting because of the concerns shown by the owners of financial institutions to the modernity of starch. According to the latest international reports, the report of the Swiss company KPMG in 2018, in which it showed the volume of international investment by startups reached $111.8 billion and trade transactions increased to about 2196 the proportions of digital users were estimated at 64% for 2018 according to the following schedule:

Table 1 Technology Utilization Rate in the World 2018

% State % State
87 Chilean 66 China
87 Brazil 64 India
82 Germany 63 Russia
82 Sweden 63 South Africa
80 New zealand 63 Colombia
76 Australia 59 El, Boru
76 Spain 56 Netherlands
72 Italy 51 Mexico
71 Canada 50 Erlemda
71 United States 46 Britain
67 Belgium 42 Argentine
67 France 35 Hot Kong
67 Japan 34 Singapore
67 World average 64% South Korea

Source: Ey Building a better working world, Ey Global Fintech Adoption Index 2019, P 07.

The concept of digital technology

Many definitions of financial technology have been identified by some as technical financial innovation, which in turn generates new innovation in business programs or application models, processes and products. (Schindler, 2017)

If financial technology is an important part of the overlap of the financial services and digital sectors with everything that would enhance the delivery of services and products in modern technical ways, financial technology is known as the industry of higher quality financial systems through companies that use technology. (Giodana, 2018)

It is therefore a term that combines financial knowledge with technological development in the provision of financial services and the efficiency of institutional performance.

Areas of technology

Technology is a new way and method in the financial sector and has a great impact due to its ease of dealing, transparency, higher quality and faster operations. Achieving better financial coverage and reducing the cost of services and the desire of traditional institutions to shift towards the use of modern digitization is to take advantage of the efficiency of services provided by financial technology companies as well as to maintain their lack of presence in the financial markets (Wahiba, 2019).


Technology was not welcome as it was seen as a threat to companies and financial institutions as it breaks into many areas and increases customer demand, so the banking sector responded to this development and has been dealt with in many areas.

  1. Fund a person through a customer database that includes elements of spending, savings and tax obligations
  2. These payments are manifested by the processes through which the values of the world are processed, represented by cryptocurrencies, block chains and conversion platforms.


Technology has contributed to the advancement of the insurance sector in various stages, including:

  1. Products that use innovation and artificial intelligence and provide technical solutions using data analysis.
  2. Digital distribution platforms

Assets Regulation

This process is manifested by managing investments for individuals, providing services through digital platforms and offerings that use calculations through automated consultants that compensate for the presence of the traditional consultant as well as by using artificial intelligence that manages customer portfolios (Wahiba, 2019).

Stages of the development of financial technology: –

Phase 1

1-The stage of ideas as most startups are still in the process of building models and dealing with laws to win customers.  At this stage, the first transoceanic cable was extended and the first electronic propulsion device was created for 1866-1967.

2-The second phase of the establishment and processing phase after the gain of customers in the first phase developed a strategy to deal with the relevant entities and institutions.

3-he advanced access phase where the focus was on concluding major deals with high value companies, and this stage extended today after 2008, after the global financial crisis if it directly affected the emergence of many startups that competed with companies and banks in the provision of financial services.

Advantages of Financial Technology

  1. Offers iron skills, freshness and innovative methods
  2. A tool used to achieve the desired goals of financial institutions
  3. Give more security to customers and customers
  4. Change from management form to better (Qadir, 2013)
  5. Less expensive if there is many expenses, especially in transfers
  6. Save time and effort in financial and banking operations
  7. Globalization of the economy between the world and the Arab region and taking advantage of the West’s experiences in the field of applications.

     The role of technology in promoting financial inclusion

Clear and tangible progress has been made in expanding global financial coverage, with the number of individuals with an account in financial institutions rising by about 700 million between 2014 and 2011

However, the gap in the disparity between males and females is still clear if it reaches 7% globally and arab 9%, and the international community has given great importance to digital finance in accelerating the achievement of the Sustainable Development Goals if the report of the Special Adviser to the Secretary-General for Comprehensive Finance issued 2018 entitled (Technology, Innovation and Progress) focused on the importance of modern innovations and technologies in supporting and accelerating the wheel of comprehensive financing and called for the process of financial inclusion to be considered a necessity and work to allocate funding for the construction of infrastructure for the digital sector and to issue  Laws to win the trust of citizens and ensure that everyone uses digital financial services safely and reliably (World Bank, 2014). The Global Financial Inclusion Initiative was launched globally in 2017 and is a short-term (three-year) initiative between the World Bank Group, the Payments and Infrastructure Committee for the Global Market and the International Federation. To promote financial inclusion and intensify technical efforts and innovations in the financial sector.

Regionally, the Arab world has seen somewhat marked progress since 2011, but it still registers low rates compared to the world, and only the 2017 Global Financial Inclusion Index database report, with only about 37% of adult individuals with financial accounts on the world record register registering about 68.8%, and the gap between males, females, villages, cities, low-income groups and high income groups remains very clear and influential in these ratios. Many women continue to suffer financial exclusion in terms of financial, banking and finance transactions.

The report of the Federation of Arab Banks explained the reality of financial inclusion in Arab countries and the role of digital technology issued in 2019 the importance of technical development and digital solutions that will raise the level of financial inclusion through payments through telecommunications devices, the Internet and social media applications, and the report indicates that the proportion of adults who made digital payment blinds increased from 20% in 2014 to 26% in 2017 (Economic and Social Commission for West Asia, 2019)  The report showed that the Gulf countries are the most influential in these ratios due to the use of throwing technology and the high levels of income, stability and safety witnessed by these countries. Widespread demand from Gulf banks and financial institutions to introduce digitization of the field of finance and business. As for the locality, given the importance of financial inclusion as one of the most important causes of economic growth and a real driver of the wheel of sustainable development, the Central Bank of Iraq has taken several measures to enhance financial coverage, including the localization of salaries approximately (2076) spending unit and 867589-government employee in 2020. The Central Bank has launched several initiatives, including the National Pension Authority, which provides for the continued settlement of salaries after retirement, and the Central Bank has granted three companies to work as a service provider. Strategic Plan for Duration -2016-2020.


1.Technology plays a major role in the global economy through new and rapidly spreading innovations and applications.

  1. Financial inclusion is the main driver of the growth process by achieving financial stability achieved by enhancing access to financial services to all the secrets of society.
  2. Accelerating the process of digital financial transformation in Iraq has become a necessity for sustainable development and benefiting from the experiences of digital technology adopters
  3. The weakness of the culture of society using financial technology has led to the delay of financial inclusion processes in the Arab world except some countries such as the Gulf countries.
  4. The modernity of the telecommunications and digital technologies sector in Iraq and the lack of a culture of society all this contributed to the low levels of spread of financial inclusion processes.

6.Most banks, companies and banks are concentrated in large cities and their small or non-existent in small villages or rural areas, especially in the Arab and local countries, and this prevents the access of financial services to all segments of society,

  1. Weakness or lack of the role of insurance companies or the control of a public company in this sector Arab and local


  1. Raising awareness among groups that continue to question the importance of financial technology.
  2. Update and enact laws and legislation that will preserve the rights of customers.
  3. Addressing the gap between females, males, cities, villages, low-income groups and high-income groups.
  4. Providing digital integration infrastructure and ecosystems suitable for digital transformation.
  5. Concluding agreements between locally, Arably and internationally to benefit from the experiences of technologically advanced countries.
  6. Adopt an annual plan for financial inclusion and auditors at the end of each year, diagnose, and address pros and cons.
  7. Benefit from the expertise of students, researchers and staff seeking outside the country in the field of digital technology.
  8. Encourage employees in banks, banks, payment channels and centers to develop their technical skills.
  9. Updating legislation and laws that would protect individual customers and this would increase the community’s demand for digital financial services.


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5/5 - (3 أصوات)

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