Evaluating the Impact of Digital Financial Inclusion on Rural Entrepreneurship and Income Inequality in South Asia: A Comparative Econometric Analysis

This study investigates the role of Digital Financial Inclusion (DFI) in fostering rural entrepreneurship and reducing income inequality across five South Asian countries—India, Bangladesh, Pakistan, Nepal, and Sri Lanka—between 2010 and 2023. Employing a comparative panel econometric approach, the research constructs a Digital Financial Inclusion Index (DFII) using indicators such as mobile banking access, internet usage, and digital transactions. The findings reveal that increased DFI is significantly associated with higher rates of rural entrepreneurship, as reflected in startup density and MSME registrations, and with reduced income inequality, measured by Gini and Theil indices. Fixed-effects regression and instrumental variable models demonstrate the robustness of these relationships, while country-specific analyses highlight contextual differences, with India and Sri Lanka emerging as leaders in leveraging DFI for inclusive growth. The study contributes to the literature by empirically validating the dual developmental impact of DFI and offers actionable policy recommendations centered on infrastructure investment, digital literacy, and inclusive fintech regulation. It also challenges the conventional Kuznets Curve by suggesting that digital financial tools can flatten inequality at earlier stages of development.