Finance for Whom? Exploring the Conditional Impacts of Financial Inclusion on Economic, Social, and Environmental Sustainability in the Global South

ABSTRACT Financial inclusion (FI) has been championed by international institutions as a cornerstone for achieving the sustainable development goals (SDGs), yet its impacts on sustainability remain unsettled. This paper investigates the conditional effects of FI on the three pillars of sustainable development—economic sustainability (ECS), social sustainability (SOS), and environmental sustainability (EVS)—in 50 Global South countries from 2000 to 2023. Building on a novel theoretical framework, we argue that FI's developmental impacts depend on three enabling conditions: human capital (HUC), digital readiness (DIR), and renewable energy penetration (REN). Using system GMM to address dynamics and endogeneity, the augmented mean group (AMG) estimator to account for heterogeneity and cross‐sectional dependence, and panel threshold models to identify nonlinear tipping points, we provide robust evidence that FI is a necessary but insufficient driver of sustainability. Results show that FI enhances growth primarily where human capital is stronger, reduces inequality only when digital ecosystems are broad and affordable, and mitigates environmental pressures when renewable energy capacity is significant. Regional subsamples highlight contrasting dominant channels: DIR in Sub‐Saharan Africa, HUC in South Asia, and REN in Latin America. A post‐2015 analysis indicates stronger alignment with SDG priorities, reflecting policy shifts in the wake of the 2030 Agenda. Conceptually, the study extends finance‐for‐development theory by reframing FI as a context‐dependent catalyst, while empirically it offers the first integrated cross‐pillar evidence for the Global South. Policy implications stress the need for coupling FI with parallel investments in education, digital infrastructure, and green energy.