Impact of financial inclusion on economic growth, financial development, financial efficiency, financial stability, and profitability: an international evidence

This study investigates the effect of financial inclusion on economic growth, financial development, bank’s financial efficiency, financial stability, and bank’s profitability in high-, low-, and middle-income countries by controlling income inequality, gross fixed capital formation, population growth, and inflation as key determinants. Using the annual data from 1984 to 2018, the long-run estimates from FMOLS and DOLS model reveal whether financial inclusion spurs economic growth, financial development with financial institutions and markets, bank’s financial efficiency, financial stability, and bank’s profitability in each level of income group. From the above findings, it is clear that more percentages of the population in every country must be brought under financial inclusion to achieve substantial growth in any economy as financial inclusion has a positive impact in the case of most of the models. From the policy perspective, the government should invest their fiscal money into the education sector, research and development, etc., which will connect financial inclusion to the financial sector. These findings also offer key macroeconomic policies. Analysing this perspective would contribute to the literature with broader relevance for all economies, mainly for low-income countries as they suffer from low GDP growth, poverty, unemployment, income inequality, etc.