Does financial inclusion enhance economic growth? Empirical evidence from the IsDB member countries

Abstract

This innovative study examines the effect of financial inclusion measured by financial inclusion index (FII) on the economic growth of the Islamic Development Bank (IsDB) member countries. The data were collected on different elements of financial inclusion and economic growth for the period 2000-2016.To draw multi-dimensional results, we have set up the panel data for 45 countries, and we estimated the generalized method of moments (GMM), two-stage least squares (2SLS), panel vector autoregressive (VAR) and panel Granger causality tests. Based on the results of dynamic panel estimations, we find that FII has a positive effect on economic growth. The findings of Granger causality analysis reveals a bi-directional causality of FII indicators with economic growth and a unidirectional causality between the FII and economic growth.Therefore, it suggests that the financial inclusion index has a positive effect on the economic growth in IsDB member countries. These findings recommend that the policymakers should consider financial inclusion as a driver of the economic growth in the long run. The empirical findings have useful policy insights for the IsDB member countries.

Nexus of regional integration, socioeconomic determinants and sustainable development in belt and road initiative countries

“…The Hansen and Sargan test was applied to examine the instrument’s reliability and control the over-identifying restrictions in the analysis. Therefore Hansen test and Sargan tests to estimate the other restrictions were also validated [ 24 , 70 ]. The number of instruments (J-statistics) employed is 51, which indicates that the two-step system GMM is a valid instrument for this study.…”

“…Generalized methods of moments (GMM) provide better results with correct model specifications than single-equation models and techniques. Two-step system GMM is the best suitable, where we do not know the distribution of the dependent variable [ 70 ]. The lag-value of SD is taken in GMM to make it a dynamic model and avoid the issue of autocorrelation as prevails in the static regression model.…”

Mobile Banking Adoption In Emerging Countries: The Role Of Customer Demographic Characteristics

“…High purchasing power indicates higher money transactions so that these transactions can be made easier by mobile banking. Those who work will feel comfortable when financial transactions can be done anywhere and anytime (Ali et al, 2021;Kang et al, 2012;Souiden et al, 2021). It also helps them, even more, when they are at work to use mobile banking to still make financial transactions while working.…”

“…This closeness becomes a hope for banks and also, of course, the government because people who are increasingly open to banking products show progress in a country (Chiu et al, 2017;Merhi et al, 2020). A high level of financial inclusion can increase economic growth because banking transactions can help increase people's purchasing power and increase money circulation within a country (Ali et al, 2021;Lal, 2021;Nandi et al, 2021). In addition, the ease of transactions that is upheld by mobile banking can increase the opportunities for the internationalization of business actors in a country (Gregori, 2021;Mataveli et al, 2021).…”

Dynamic Nonlinear Connectedness between the Financial Inclusion, Economic Growth, and China’s Poverty Alleviation: Evidence from a Panel VAR Analysis

“…is is because in addition to the different definitions of financial inclusion, past studies have mostly focused on the linear effect or overall effect between financial inclusion and economic growth, ignoring the potential nonlinear effect or regional heterogeneity between them. As pointed out by Ali et al [67], when exploring the economic impact of financial inclusion, it is necessary to include nonlinear effects or cross-group factors in the study, which can indicate the optimal strategy in different situations. When Li et al [13] analyzed the economic growth effect of financial inclusion, they found that there was a significant positive impact in eastern China, but no significant impact in the central and western regions.…”