FinTech and financial inclusion in emerging and developing economies: a system GMM model

This study explores the role of financial technology (FinTech) in promoting financial inclusion across 28 emerging and developing economies (EMDEs) from 2011 to 2021. While financial inclusion has been widely studied, limited research focuses on the concurrent impact of FinTech on financial access in multiple EMDEs. Using Principal Component Analysis (PCA), a new financial inclusion index was constructed, incorporating two dimensions: access and usage. A System Generalized Method of Moments (GMM) model was applied to examine the relationship between FinTech and financial inclusion, while the Ordinary Least Squares (OLS) technique was used to assess factors influencing barriers to inclusion. The results reveal that a 1% increase in FinTech leads to a 0.1772 unit rise in the financial inclusion index. Additionally, education, GNI per capita, and broad money to GDP were found to affect barriers to financial inclusion. This study underscores the importance of FinTech in achieving the United Nations’ Sustainable Development Goals (SDGs) and G20 principles for digital financial inclusion, recommending investment in digital infrastructure and stronger regulatory frameworks for FinTech development.