A Systematic Literature Review on Impacts of Financial Inclusion and Digital Banking on Economic Growth: The Mediating Role of Financial Institutions

Abstract In this study, we conduct a systematic review of the existing empirical literature that evaluates the effect of financial inclusion and digital banking on economic development with special attention to the moderating effect of financial institutions. Adhering to the PRISMA 2020 criteria, an extensive literature search was performed in prominent scholarly databases such as Elsevier, Emerald, Springer, Taylor & Francis, and Wiley. In total, 150 articles were found at the first stage, among which 32 articles published between 2021 and 2026 qualified for further analysis fulfilling the inclusion criteria. The review adopted the mixed-review approach where the effect of digital banking and financial inclusion on economic growth was synthesized using the qualitative thematic synthesis alongside effect-count (vote-counting) analysis. According to the results of the review, there is clear consensus among the researchers about the impact of financial inclusion and digital banking on economic growth through improving access to financial services, saving money, making investments, improving productivity, reducing transaction costs, and fostering entrepreneurship. The effect-count analysis shows that out of the 32 studies examined, 31 (96.9%) found a positive effect of digital financial inclusion on economic growth whereas one study (3.1%) found a nonlinear or conditional effect whereas no studies found negative effect. In addition, the review showed that financial institutions act as a mediator and transform digital financial innovations and financial inclusion into economic activities through efficient financial intermediation, credit allocation, savings mobilization and resource allocation. Other important contextual variables include institutional quality and effectiveness of regulation as well as digital infrastructure. The review identifies important gaps in the literature such as lack of empirical evidences of the mediating role of financial institutions, longitudinal studies, and evidences from low-income countries such as Ethiopia and Sub-Saharan Africa. The research suggests the adoption of measures such as strengthening digital financial infrastructure, enhancing institutional quality, fostering digital financial literacy, and creating regulatory framework that supports the efforts toward improving financial inclusion and economic development.