Role of financial inclusion and ICT for sustainable economic development in developing countries

Abstract

Sustainable economic development and its close link with financial inclusion have gained so much attention in the empirical literature in the past. However, with the advent of information and communication technology and its association with financial platforms, a system has emerged that offers new opportunities to fill the wealth gaps in the developing world. Empirical investigations are rare in the context of the developing region, and this study strives to fill this gap. We aim to investigate this link for developing countries based on innovation diffusion theory. For this purpose, we select an extended sample of 110 developing countries from 2004 to 2020. Through principal component analysis, we formulate composite financial inclusion and ICT indicators based on broader attributes. We employed Driscoll–Kraay standard errors (D-K), Generalized linear model (GLM), feasible general least squares (FGLS), and difference GMM to obtain compressive and consistent regression coefficients without the need to address temporal dependence and heteroscedasticity. The robust panel estimation illustrates a significantly positive effect of financial inclusion, information communication and technology and sustainable economic development. Our results hold for subsamples based on different income levels of countries. The policymakers are recommended to develop policies for an inclusive financial system and access to ICT on an equitable basis to ensure sustainable economic growth.