Assessing the impact of digital finance on inequality, poverty and carbon emissions in developing Asian countries using structural equation model

In this paper, considers the relationships between digital financial services in particular, account ownership, saving, and borrowing and three sustainable development goals: poverty (SDG 1), income inequality (SDG 10), and CO2 emissions (SDG 13). It analyzes the relationships between 25 developing Asian nations between 2011 and 2021 and uses structural equation modeling (SEM) and subsequent regression-based robustness checking to determine both direct and indirect relationships with account ownership, saving, and borrowing being the mediating channels of financial inclusion. The results suggest that high utilization of the digital payments correlates with reduced income inequality and increased consumption spending in households, especially in the environment with a wider access to financial services. Meanwhile, the use of digital payments has a positive correlation with CO2 emissions, which is in line with the rise in energy consumption associated with digital infrastructure. Nonetheless, the channels of financial inclusion account ownership, saving and borrowing are mediated by these environmental pressures to a certain degree and are related to more sustainable patterns of consumption and investment. To the best of our knowledge, this study is among the first to jointly examine these multidimensional direct and indirect associations between digital finance, inequality, poverty-related outcomes, and environmental sustainability in developing Asia. The results underscore the relevance of integrated financial inclusion and environmental responsibility policies and may inform the design of targeted interventions such as support for low-income digital users and incentives for green financial products aimed at aligning digital finance with equitable and sustainable development objectives.