New insights into the impact of financial inclusion on economic growth: A global perspective

Abstract

Financial inclusion is critical to inclusive growth, proffering policy solutions to eradicate the barriers that exclude individuals from financial markets. This study explores the effects of financial inclusion on economic growth in a global perspective with a large number of panels classified by income and regional levels from 2002–2020. The analysis begins with the development of a comprehensive composite financial inclusion index comprised of penetration, availability, and usage of financial services and the estimation of heterogeneous panel data models augmented with well-known variables. The results obtained from the panel cointegration test support a long-run relationship between economic growth, financial inclusion, and the control variables in the full panel, income-level, and regional-level economies. Furthermore, the study employs a GMM (generalized method of moment) approach using System-GMM estimators to examine the effects of financial inclusion and the control predictors on economic growth. The results of the GMM model clearly indicate that financial inclusion has a significantly positive impact on economic growth across all panels, implying that financial inclusion is an effective tool in fostering rapid economic growth in the world. Finally, the study delves into the causality relationship between the predictors and provides statistical evidence of bidirectional causality between economic growth and financial inclusion, whereas it only supports unidirectional causality relationships from credit to the private sector, foreign direct investment, inflation rate, the rule of law, school enrollment ratio, and trade openness with no feedback causality. Moreover, the study fails to provide causality evidence from the age dependency ratio and population to economic growth.

Enhancing economic growth through financial inclusion: An ARDL analysis

“…Despite the disadvantages, financial inclusion still contributes positively to economic growth in the long run. Our empirical result regarding the role of financial inclusions in short run and long run can be supported by several empirical studies (Dai et al, 2022;Huang et al, 2021;Ifediora et al, 2022;Jima, 2023;Menyelim et al, 2021;Azimi, 2022;Obayori & George-anokwuru, 2020) conducted by taking overall relationship of financial inclusion and economic growth in difference aspect.…”

“…At the core of this effort is the concept of financial inclusion -a comprehensive approach that aims to provide equitable and unrestricted access to financial services for all society's consumers, especially those demoted and lacking access to traditional banking services. As a result, the relationship between financial inclusion and economic growth has gained significant attention and has been subject to extensive empirical research (Chen et al, 2023;Ifediora et al, 2022;Jima & Makoni, 2023;Menyelim et al, 2021;Azimi, 2022;Nwisienyi & Obi, 2020;Emara & El Said, 2021;Ozili, 2020). Countries increasingly recognise the importance of inclusive financial systems in driving economic development and reducing social and economic inequalities.…”

Financial Inclusion and Economic Empowerment

“…Research has indicated a significant association between financial inclusion and economic growth (Uzoma et al, 2022;Sethi & Acharya, 2018;Ratnawati, 2020;Azimi, 2022). Financial inclusion has been identified as a driver of economic growth in various countries, including Nigeria (Uzoma et al, 2022).…”

Revitalising socio-economic empowerment through cooperative banks: insights from India

“…These cooperatives have the power to generate employment, reduce poverty and enable social engagement for overall empowerment (Lal, 2019). Various researchers strongly argue that financial participation not only eradicates poverty but also influences economic prosperity (Azimi, 2022;Khan, Haouas, Trinh, Badeeb, & Zhang, 2023;Omar & Inaba, 2020). Similarly, studies also argue that financial participation through cooperative efforts improves inclusive finance, reduces poverty, creates employment and improves the quality of life, all of which lead to socio-economic development and social integration.…”