The Role of Financial Inclusion and Digital Finance in Reducing Poverty and Promoting Sustainable Economic Growth in Developing Economies.

Hina Shafiq; Anila Perveen; Ayesha Mustafa; Dildar Ali

doi:10.63056/academia.5.3(s8).2026.2121

Authors

Hina Shafiq Department of Economics, Sardar Bahadur Khan Women’s University, Quetta, Pakistan. Author
Anila Perveen Faculty of Business Administration, Iqra University Gulshan Campus, Pakistan Author
Ayesha Mustafa International institute of Islamic Economics, International Islamic University Islamabad, Pakistan. Author
Dildar Ali Department of Business Administration (MBA), Shaheed Benazir Bhutto University, Benazirabad Author

DOI:

https://doi.org/10.63056/academia.5.3(s8).2026.2121

Keywords:

Financial inclusion, digital finance, poverty reduction, economic growth, developing economies, Pakistan, mobile banking, digital wallets, income inequality, System Generalized Method of Moments (SGMM)

Abstract

This study examines the role of financial inclusion and digital finance in reducing poverty and promoting sustainable economic growth in developing economies, with a particular focus on Pakistan. Using panel data from 101 developing countries for 2010–2020 and Pakistan-specific data for 2013–2024, the study applies a System Generalized Method of Moments (SGMM) approach to analyze the relationships among financial inclusion, digital finance adoption, poverty, and economic growth. The findings show that financial inclusion has a positive effect on economic growth, while digital finance has an even stronger growth-enhancing impact and a direct poverty-reducing effect. Although financial inclusion alone does not directly reduce poverty in the short term, its indirect effects through economic growth and income inequality reduction are significant. The interaction between financial inclusion and digital finance further strengthens both growth and poverty alleviation outcomes. The study concludes that digital finance acts as a multiplier of financial inclusion, and policy efforts should prioritize digital infrastructure, financial literacy, consumer protection, and inclusive access to financial services.