The impact of financial inclusion on economic development: the mediating roles of gross savings, social empowerment and economic empowerment

Purpose The purpose of this paper is to measure the impact of financial inclusion on economic development. Design/methodology/approach Study 1 used World Bank Data to develop financial inclusion percentages of ownership of checking accounts, savings accounts, debit cards and loans for 179 countries among the poorest 40% of the population, from 2011-2017. Regressions established the financial inclusion, gross savings and GDP per capita growth linkage. Study 2 created and validated scales to measure social empowerment, economic empowerment and economic development, among inhabitants of Bangladesh villages. Structural equation modeling measured the mediation by social empowerment and economic empowerment of the financial inclusion and economic development linkage. Findings Total financial inclusion was significantly explained by gross savings, which was significantly explained by GDP per capita growth. Ownership of a checking account significantly increased gross savings, while ownership of a savings account significantly increased GDP per capita growth. Ownership of a checking account differentiated countries with the highest 5% of gross savings, while ownership of a debit card significantly differentiated countries with the GDP per capita growth. Social empowerment and economic empowerment significantly mediated the financial inclusion and economic development relationship. Originality/value The study is unique in examining financial inclusion from a multi country, macroeconomic perspective combined with measurement of its theoretical underpinnings through a primary data-based sample extracted from respondents in Bangladesh, a lower middle-income country in Southeast Asia.