The Impact of Financial Inclusion on Global Economic Growth: A Panel Data Analysis

Abstract

Financial inclusion is fundamental to sustainable economic development, as it facilitates access to formal financial services such as banking, credit, insurance, and electronic payments. This study examines the impact of financial inclusion on economic development, specifically focusing on its relationship with Gross Domestic Product (GDP) per capita across 14 countries over the period 2014 to 2024. First, the study constructs a Financial Inclusion Index (FII) using Euclidean and inverse-distance approaches. Then, the study utilized Stata to perform panel regression analysis, employing both aggregate and disaggregate financial inclusion models to determine how various financial access and usage indicators influence economic growth. The findings indicate that financial inclusion, especially the availability of ATMs, commercial bank branches, and debit cards, plays a significant role in driving GDP growth. Conversely, other variables, including FDI, deposit accounts, credit cards, and outstanding deposits, demonstrated weak or insignificant relationships with GDP across most models. The research highlights the importance of enhancing access to financial services, particularly through digital platforms, to support economic development in emerging economies. The results suggest that improving accessibility to financial products and services can stimulate economic growth and foster the maturation of the financial ecosystem. The study provides valuable insights for policymakers by emphasizing that prioritizing digital financial services and tailoring products for underserved communities is the most effective way to ensure greater economic resilience.