Impact of financial inclusion on economic growth: review of existing literature and directions for future research

Abstract

Purpose

The impact of financial inclusion on economic growth is a topic that is generating widespread interest among researchers and practitioners. In this paper, the authors review the existing literature to highlight the state of research in the literature and identify new opportunities for innovative research.

Design/methodology/approach

The authors used a thematic literature review methodology which involves dividing the review along relevant themes.

Findings

The authors find that significant research on the topic emerged in the post-2016 years. Most of the existing studies are from developing countries and from the Asian and African regions. Existing studies have not utilized relevant theories in explaining the impact of financial inclusion on economic growth. Most studies report a positive impact of financial inclusion on economic growth while very few studies show a negative impact. The most common channel through which financial inclusion affects economic growth is through greater access to financial products and services offered by financial institutions that increases financial intermediation and translates to positive economic growth. The common empirical methodology used in the literature are causality tests, cointegration and regression methods. Multiple proxies of financial inclusion and economic growth were used in the literature which partly explains the conflicting result among existing studies. The review paper concludes by identifying some directions for future research.

Originality/value

This paper presents the first rigorous thematic review of the existing literature on the impact of financial inclusion on economic growth. It highlights the main approach that researchers have taken on this topic and identifies some important research areas for future investigation.

Peer review

The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-05-2022-0339.

Citation

Ozili, P.K., Ademiju, A. and Rachid, S. (2023), "Impact of financial inclusion on economic growth: review of existing literature and directions for future research", International Journal of Social Economics, Vol. 50 No. 8, pp. 1105-1122. https://doi.org/10.1108/IJSE-05-2022-0339