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Financial Resilience: A Way Forward Towards Economic Development in Developing Countries

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Abstract

Financial inclusion is a policy priority in both developed and developing countries. Yet almost one in four people remain financially excluded around the globe, with the vast majority living in the developing world. In this paper, we argue that financial resilience: an individual’s ability to function effectively in adverse financial situations, can better help us assist people to cope with financial adversity, develop effective policy and, ultimately, improve economic development. This paper builds on an existing financial resilience measurement framework and adapts it to develop a measure appropriate to the context of developing countries. Indonesia, where one in three people are financially excluded, is used as a case country from which to draw conclusions. We use the Indonesia Family Life Survey and put forward the country’s first snapshot of financial resilience. Implications for research and policy are presented.

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Availability of data and material

This paper uses data from the Indonesia Family Life Survey. This data is publicly available.

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Notes

  1. Figures in US dollars per day are converted into annual values in Rupiah using the private consumption purchasing power parity-adjusted conversion factor, equal to 4,721 Rp. per USD in 2015 (source: https://data.worldbank.org/indicator/).

  2. We use 2, instead of 1.75, as the threshold that characterizes the lower end category of severe financial vulnerability. Using 1.75, only 1.9% of the sample would fall in that vulnerability category. Using 2, 6.2% of the sample falls in that category, which is more consistent with other studies explaining that 7% of the Indonesian population are extremely poor (World Bank, 2020), although we do not pretend that there should be an exact match between extreme poverty and severe financial vulnerability.

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Authors and Affiliations

  1. Kedge Business School, Department of Strategy, Sustainable Development and Entrepreneurship, Bordeaux, France

    Fanny Salignac

  2. Kedge Business School, Department of Strategy, Sustainable Development and Entrepreneurship, Marseilles, France

    Julien Hanoteau

  3. Centre for Social Impact, University of New South Wales, Sydney, Australia

    Ioana Ramia

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  1. Fanny Salignac
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Correspondence to Fanny Salignac.

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Table 5 Survey questions, financial resilience framework
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Salignac, F., Hanoteau, J. & Ramia, I. Financial Resilience: A Way Forward Towards Economic Development in Developing Countries. Soc Indic Res 160, 1–33 (2022). https://doi.org/10.1007/s11205-021-02793-6

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