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<p>This study examines the impact of financial inclusion on key socio-economic outcomes, namely economic growth, financial stability, and income inequality, during the pre-COVID era. We develop a composite Financial Inclusion Index (FII) using a multidimensional framework encompassing indicators of availability, usage, and penetration dimensions. The analysis covers 60 developing countries from 2005 to 2019 and employs the two-step System Generalised Method of Moments (GMM) to address potential endogeneity and dynamic panel bias. The results reveal that financial inclusion significantly promotes economic growth, particularly by improving access to banking. However, it shows no statistically significant relationship with financial stability. In contrast, higher financial inclusion appears to widen income inequality, likely due to unequal access to financial services and uneven distribution of benefits. By applying a unified FII across three macroeconomic outcomes using a consistent sample and methodology, this study provides comprehensive insights into the multifaceted effects of financial inclusion in developing economies. The findings underscore the need for policies that enhance access to finance, strengthen financial literacy, and promote responsible lending to ensure that financial inclusion contributes to inclusive and stable economic development.</p>

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Financial inclusion and macroeconomic outcomes in developing economies: pre-COVID insights on growth, stability, and inequality

  • 期刊论文

  • 出版模式：

    开放获取

  • 发表日期：

    2026年1月28日

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  • Amiratul Nadiah Hasan,
  • Mansor Ibrahim,
  • Kinan Salim

摘要

This study examines the impact of financial inclusion on key socio-economic outcomes, namely economic growth, financial stability, and income inequality, during the pre-COVID era. We develop a composite Financial Inclusion Index (FII) using a multidimensional framework encompassing indicators of availability, usage, and penetration dimensions. The analysis covers 60 developing countries from 2005 to 2019 and employs the two-step System Generalised Method of Moments (GMM) to address potential endogeneity and dynamic panel bias. The results reveal that financial inclusion significantly promotes economic growth, particularly by improving access to banking. However, it shows no statistically significant relationship with financial stability. In contrast, higher financial inclusion appears to widen income inequality, likely due to unequal access to financial services and uneven distribution of benefits. By applying a unified FII across three macroeconomic outcomes using a consistent sample and methodology, this study provides comprehensive insights into the multifaceted effects of financial inclusion in developing economies. The findings underscore the need for policies that enhance access to finance, strengthen financial literacy, and promote responsible lending to ensure that financial inclusion contributes to inclusive and stable economic development.