Unlocking the Path to Inclusive Growth: Examining the Impact of Financial Inclusion in Developing Economies

Banna Banik
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Banna Banik: Bangladesh Bank, Head Office, Dhaka 1000, Bangladesh.

International Journal of Science and Business, 2023, vol. 26, issue 1, 233-247

Abstract: This empirical research study explores the influence of financial inclusion (FI) on long-term economic growth within a dataset comprising 50 developing countries over the period from 2010 to 2022. Sustainable per capita economic growth, defined as an annual growth rate of a minimum of 7%, serves as a representative measure for sustained economic growth, while the growth rate of branches of bank and ATMs per 0.1 million people functions as a proxy for FI. Employing panel data models, our findings suggest a positive correlation between FI and sustained economic growth, although this relationship does not attain statistical significance. We also employ robust endogeneity-consistent estimation techniques, including the two-step system and differenced Generalized Method of Moments (GMM) approaches, and our results consistently indicate that financial inclusion, as measured by bank branches and ATM outreach, does not appear to be a significant driver of economic growth. Consequently, central banks and governments are encouraged to formulate and implement more effective strategies and initiatives aimed at enabling greater access and utilization of financial services among unbanked populations, with the potential to yield tangible benefits from financial inclusion and consequently foster higher growth rates in developing nations.

Keywords: Financial Inclusion; Economic Growth; GMM; Panel Data; Developing Countries. (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:aif:journl:v:26:y:2023:i:1:p:233-247

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