AMF issues “Impacts of Financial Inclusion on Human Capital Development in the Arab Region" study

•     Financial inclusion significantly boosts human capital development in Arab countries, positively impacting education and health outcomes.
•     Prioritizing financial inclusion is crucial for promoting inclusive economic growth and reducing inequality, especially among marginalized populations.
•     Improved access to financial services enables individuals to invest in their education and health, fostering human capital development and long-term prosperity.
•     Policymakers should focus on improving lending policies, encouraging savings, and expanding financial services to ensure equitable access for all segments of society.
•     Special attention should be given to the health and education sectors, as they play a pivotal role in enhancing human capital and achieving sustainable economic development.

The Arab Monetary Fund (AMF) has conducted an important study titled "Impacts of Financial Inclusion on Human Capital Development in the Arab Region." The study sheds light on financial inclusion’s significant role in promoting human capital development, a key driver of economic growth, in Arab countries.

Financial inclusion has emerged as a crucial policy objective in numerous countries, particularly the developing world. The AMF's study examines the nexus between financial inclusion and human capital development over 15 years from 2004 to 2019, focusing specifically on Arab countries.

Human capital, which encompasses the economic value of an individual's skills, knowledge, and health, has long been recognized as a catalyst for sustained economic growth and social inclusivity. Investing in people's education, health, and well-being has proven instrumental in driving economic development and creating more inclusive societies.

The study conducted by the AMF investigates how enhancing access to financial products and services can improve human capital development in critical areas such as education and health. The study’s findings align with previous empirical research, revealing that financial inclusion has a positive and lasting impact on human capital development in Arab countries.

By employing a dynamic panel data model and analyzing data from 12 Arab economies, including Algeria, Egypt, Jordan, Kuwait, Lebanon, Morocco, Oman, Palestine, Qatar, Saudi Arabia, Tunisia, and the United Arab Emirates, the AMF researchers estimate the relationship between financial inclusion and human capital development. The study utilizes the Panel Mean Group (PMG) approach to provide robust insights.

The study’s key findings underscore the positive influence of financial inclusion on human capital development in the Arab region. Improved access to financial services positively affects education, health, and human capital development. The study emphasizes the significance of addressing challenges such as information asymmetry and moral hazard in the financial sector, as they hinder credit extension to the public, particularly among low-income segments of society.

Drawing upon these findings, the AMF study offers several policy recommendations to Arab authorities. The report calls for prioritizing financial inclusion to enhance human capital development, especially for marginalized populations. Policymakers are urged to improve lending policies, encourage savings, and ensure equitable access to financial services across all sectors of society. Additionally, the study emphasizes the pivotal role of the health and education sectors in fostering human capital and achieving sustainable economic development. The study conducted by the AMF contributes to the body of knowledge on the nexus between financial inclusion and human capital development, providing valuable insights for policymakers, economists, and development practitioners working towards promoting inclusive growth and sustainable development in Arab countries.