Revisiting the relation between financial inclusion and economic growth: a global analysis using panel threshold regression

Abstract

This study revisits the relationship between financial inclusion and economic growth using data from 153 countries. Despite the extensive discourse on the role of financial inclusion in spurring economic growth, empirical evidence presents mixed outcomes. Financial inclusion, measured as account ownership at a financial institution or with a mobile-money-service provider, is pivotal to integrating the unbanked population into the economic mainstream, fostering inclusive economic growth. Our analysis demonstrates that the relationship exhibits positive yet varying effects across different thresholds of financial development. Thus, while financial inclusion consistently correlates with economic growth, the magnitude and impact of this relationship vary between countries at different levels of financial development, highlighting the importance of the tailoring of financial inclusion policies to consider the specific developmental stage of the financial sector. Results also reveal that the effects of financial inclusion and financial development vary across income groups and regions, and with regard to economic fragility.