Financial inclusion and economic growth: The role of non-bank financial intermediation

This paper examines the moderating role of non-bank financial intermediation (NBFI) in the relationship between financial inclusion and economic growth. Using panel data from 26 countries between 2010 and 2021, we construct a composite financial inclusion index and include broad and narrow NBFI measures to reflect their heterogeneous characteristics. The findings confirm that financial inclusion significantly enhances economic growth, particularly in less developed economies. While NBFI also promotes economic expansion, its presence - whether broadly or narrowly defined - tends to weaken the positive effects of financial inclusion on growth. This mitigating effect is specifically pronounced for the narrow measure of NBFI in countries with medium to high levels of development. Additionally, Dumitrescu–Hurlin panel causality tests reveal a bidirectional relationship among financial inclusion, NBFI, and growth. These findings underscore the need for policy frameworks that enhance financial inclusion while ensuring NBFI supports rather than undermines its growth-enhancing impact.