Financial Inclusion-Inclusive Growth Link: Evidence from the Panel of Asian Countries

Abstract

This study examines the impact of financial inclusion on inclusive growth in selected Asian countries by using panel data from 2009–2024.  The inequality-adjusted human development index (IHDI) is used as a proxy for inclusive growth, which captures both average human development and its distribution across the population. The Financial Inclusion Index is constructed using the availability, usage, and penetration dimensions. Empirical analysis employs panel unit root tests (Levin, Lin & Chu), followed by fixed-effects and random-effects estimations. The Hausman test determines the appropriate model specification. Estimated results show that financial inclusion and inclusive growth are positively and statistically significantly correlated in terms of control variables such as GDP per capita, trade openness, government spending, mobile subscriptions, and school enrollment are found to positively influence inclusive growth in both aggregated and disaggregated model, while domestic credit to the private sector shows a negative relationship in model 1 but a positive impact in the disaggregated model, indicating possible inefficiency or unequal credit distribution. Overall, the findings highlight that financial inclusion plays a significant role in fostering inclusive growth in Asian economies, primarily through improved access and effective utilization of financial services.

Financial Inclusion, Availability, Usage, Penetration, Inequality Adjusted Human Development Index, Inclusive Growth, Asian economies