Examining the Relationship Between Digital Financial Inclusion and Sustainable Development Through the Lens of Decarbonization: Global Evidence

Sustainable Development Goals (SDGs) focus on ending poverty, protecting the environment, promoting inclusive economic growth and supporting global low-carbon transitions. Digital financial inclusion (DFI) refers to the access to and use of digital financial services. It plays a critical role in enhancing economic participation, reducing inequality, supporting sustainable development and also acts as a driver of climate-aligned investment and the ability of scalable fintech platforms to monetise green innovation. This chapter examines the relationship between DFI and the achievement of the SDGs across 45 countries from 2005 to 2020. A composite index of DFI was constructed using Principal Component Analysis (PCA), based on both traditional and digital access and usage. For the study, the methods of Moments quantile regression (MMQR) and bootstrap quantile regression (BSQR) are used to capture the heterogeneous effects of DFI across different quantiles of SDG performance. The results reveal a positive and significant relationship between DFI and SDG scores across most quantiles. Specifically, DFI has a stronger impact at higher SDG quantiles, indicating that countries that perform well in SDGs benefit more from improvements in DFI. Other factors, such as globalisation and natural resource rents, also influence SDG outcomes. According to the findings, DFI support climate action and environmentally conscious development by facilitating green financing flows, investments in renewable energy, and technology-driven sustainable business models. This study highlights how entrepreneurs, financial institutions, and policymakers are shifting towards sustainable and climate-resilient development, where DFI is a mechanism that facilitates low-carbon economic transformation and green fintech innovation, as well as a policy tool for promoting inclusive and equitable development.