Development of financial inclusion from the standpoint of ensuring financial stability

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Since 2013–2015, financial inclusion has been considered a determinant of economic and social inclusion. Meanwhile, the impact of financial inclusion on economic development directly depends on financial stability. This paper focuses on the development peculiarities of financial inclusion in relation to ensuring financial stability and provides recommendations to Ukraine.
The inclusive development theory and gap theory form the theoretical research base, while generalization, statistical methods, coefficient and graphical analysis, comparison and ranking represent its methodological basis. Financial institution development, financial literacy, income level, cashless economy, and public confidence have been justified as the content-forming factors and impact channels of financial inclusion on financial stability. The development peculiarities of financial inclusion are studied by cross-country analysis considering different financial system models and economic development levels. The weak points of financial inclusion in Ukraine are a sevenfold gap between the banks’ assets and non-bank financial institutions and 37% of the unbanked adult population. Moreover, there is a significant gap between the levels of human capital readiness and information security of banks’ digitalization compared to EU banks – by 2.5 and 1.3 times, respectively, and a critically high level of distrust in banks (70%) with a reasonably high share of payment applications users (58%).
Further developing of financial inclusion and ensuring financial stability in Ukraine requires improving credit cooperation by transforming its structure from multi-institutional to mono-institutional and introducing the developed indicative tools for monitoring potential financial stability threats caused by technological innovations.

Acknowledgment
The study has been conducted within the framework of Applied Research “Ensuring financial stability of the financial sector of Ukraine’s economy on the basis of sustainable development and in the face of the latest epidemiological challenges” with the financial support of the Ministry of Education and Science of Ukraine (state registration number 0121U113271). The authors are also thankful to the editors and anonymous reviewers for their useful suggestions and comments to improve the quality of this paper.

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    • Figure 1. The number of credit unions and banks in the United States in 2004–2020
    • Figure 2. Number of non-bank financial institutions and banks in Ukraine in 2015–2020
    • Figure 3. Number of ATMs and terminals in Ukraine in 2015–2020
    • Figure 4. Poverty level and domestic credit to the private sector in Ukraine in 2000–2020, %
    • Figure 5. Classification of digital banks
    • Figure 6. Index of readiness for digitalization of banks in Ukraine and the EU in 2020, %
    • Figure 7. The dynamics of the number of non-cash payments in the EU in 2016–2020, mln pcs.
    • Table 1. Evolutionary transformation of financial stability in the financial sector
    • Table 2. Coverage of the population by banking services: Selected CEECs in 2018
    • Table 3. Types of business models for postal operators
    • Table 4. The top 10 richest and poorest countries in Europe in 2020
    • Table 5. Potential threats and indicators for monitoring the importance of FinTech development in the context of ensuring financial stability of the financial sector
    • Conceptualization
      Аngela Kuznyetsova, Іryna Boiarko, Мyroslava Khutorna, Yuliia Zhezherun
    • Funding acquisition
      Аngela Kuznyetsova, Іryna Boiarko
    • Investigation
      Аngela Kuznyetsova, Іryna Boiarko, Мyroslava Khutorna, Yuliia Zhezherun
    • Project administration
      Аngela Kuznyetsova
    • Supervision
      Аngela Kuznyetsova, Іryna Boiarko
    • Validation
      Аngela Kuznyetsova
    • Writing – review & editing
      Іryna Boiarko
    • Data curation
      Мyroslava Khutorna
    • Methodology
      Мyroslava Khutorna
    • Visualization
      Мyroslava Khutorna, Yuliia Zhezherun
    • Writing – original draft
      Мyroslava Khutorna, Yuliia Zhezherun
    • Formal Analysis
      Yuliia Zhezherun