Can Digitalization Foster Sustainable Financial Inclusion? Opportunities for Both Banks and Vulnerable Groups

Ying Chu, Shujun Ye (), Hongchang Li (), Jack Strauss and Chen Zhao
Additional contact information
Ying Chu: School of Economics and Management, Beijing Jiaotong University, Beijing 100044, China
Shujun Ye: School of Economics and Management, Beijing Jiaotong University, Beijing 100044, China
Hongchang Li: School of Economics and Management, Beijing Jiaotong University, Beijing 100044, China
Jack Strauss: Reiman School of Finance, University of Denver, Denver, CO 80208, USA
Chen Zhao: School of Accounting, Southwestern University of Finance and Economics, Chengdu 611130, China

Sustainability, 2023, vol. 15, issue 8, 1-21

Abstract: Financial inclusion is a crucial link in achieving the Sustainable Development Goals (SDGs). Strengthening the capability of financial institutions to provide inclusive financial services can help to narrow the inequality gap and increase access to opportunities. Digitalization, with its competitive advantages and rapid growth, may be a powerful tool to foster financial inclusion and sustainable development. This paper examines the effects of bank digitalization on sustainable financial inclusion and explores two underlying incentive mechanisms in banks: profit driven and risk aversion. We construct a basic model and a mechanism model and exploit a nonlinear attempt, heterogeneous estimation as well as supplementary variable and instrument variable methods for a robustness test. The results of the basic model demonstrate that bank digitalization has significant positive effects on financial inclusion and the current financial inclusive effects are sustainable. The mechanism models designed as the mediation effect panel model suggest that digitalization enables banks to expand the business probability frontier of profit-driven behavior and pursuit of credit portfolio diversity in risk aversion behavior, thereby promoting sustainable financial inclusion. As a result of digitalization, vulnerable groups can benefit from sustainable financial inclusion, while financial inclusion feeds back into banks’ sustainable development. This paper conforms to the trend of the development of digitalization and provides theoretical and empirical support for banks to build digitalization and realize sustainable financial inclusion, which contributes to the “triple-win” financial ecology for improving banks’ performance, increasing the rights of vulnerable groups and promoting sustainable development throughout society.

Keywords: digitalization; sustainable financial inclusion; profit driven and risk aversion; bank behavior; diversity; business probability frontier; credit portfolio (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.mdpi.com/2071-1050/15/8/6727/pdf (application/pdf)
https://www.mdpi.com/2071-1050/15/8/6727/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:15:y:2023:i:8:p:6727-:d:1124743

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().