Macroeconomic Determinants of Financial Inclusion in ASEAN Countries: Implications for Sustainable Development Goals (SDGs) and Islamic Finance
DOI:
https://doi.org/10.47941/ijf.3945Keywords:
Financial Inclusion, ASEAN, Macroeconomic Determinants, Panel Data Analysis, Unemployment Rate, Islamic Finance, Sustainable Development GoalsAbstract
Purpose: This study examines the relationship between financial inclusion and four macroeconomic indicators—economic growth, unemployment rate, interest rate, and the population aged 15 years and above—across ten ASEAN member states.
Methodology: Secondary panel data covering 2000–2023 were obtained from the World Bank, the Global Findex Database, and CEIC Data. An Index of Financial Inclusion (IFI) was constructed following Sarma and Pais (2011). Panel unit root tests, Pearson correlation analysis, variance inflation factor diagnostics, and panel ordinary least squares regression were employed.
Findings: The regression model explained 57.3% of the variation in financial inclusion. Population aged 15 years and above and unemployment rate were found to have significant positive relationships with financial inclusion, whereas GDP growth and interest rate were statistically insignificant. The findings suggest that demographic structure and labour market conditions play a more important role than aggregate economic growth or borrowing costs in promoting financial inclusion across ASEAN.
Unique Contribution to Theory, Policy and Practice: The study provides regional evidence on the macroeconomic determinants of financial inclusion and offers policy implications for advancing the SDGs while supporting the broader objectives of Islamic finance in fostering inclusive and sustainable economic development.
Downloads
References
Allen, F., Demirgüç-Kunt, A., Klapper, L., & Martinez Peria, M. S. (2016). The foundations of financial inclusion: Understanding ownership and use of formal accounts. Journal of Financial Intermediation, 27, 1–30.
Andaiyani, S., et al. (2024). Determinants of financial inclusion in Southeast Asian countries. JATI – Journal of Southeast Asian Studies.
Arshad, M. U., Ahmed, Z., Ramzan, A., Shabbir, M. N., Bashir, Z., & Khan, F. N. (2021). Financial inclusion and monetary policy effectiveness: A sustainable development approach of developed and under-developed countries. PLOS ONE, 16(12), e0261337.
Bank Negara Malaysia. (2023). Financial Inclusion Framework 2023–2026. Bank Negara Malaysia. https://www.bnm.gov.my/documents/20124/55792/SP-2nd-fin-incl-framework.pdf
Bank Negara Malaysia. (2024). Annual Report 2024: Financial Capability and Inclusion Demand Side Survey 2024. Bank Negara Malaysia. https://www.bnm.gov.my/documents/20124/17493532/ar2024_en_box4.pdf
Banna, H., & Alam, M. R. (2021). Impact of digital financial inclusion on ASEAN banking stability: Implications for the post-COVID-19 era. Journal of Risk and Financial Management, 14(6), 246.
Beck, T., Demirgüç-Kunt, A., & Levine, R. (2007). Finance, inequality and poverty: Cross-country evidence. Journal of Economic Growth, 12(1), 27–49.
Becker, G. S. (1964). Human capital: A theoretical and empirical analysis, with special reference to education. Columbia University Press.
Bruhn, M., & Love, I. (2014). The real impact of improved access to finance: Evidence from Mexico. Journal of Finance, 69(3), 1347–1376.
Cicchiello, A. F., Kazemikhasragh, A., Monferrá, S., & Girón, A. (2021). Financial inclusion and development in the least developed countries in Asia and Africa. Journal of Innovation and Entrepreneurship, 10(1), 49.
Demirguc-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2015). The global Findex database 2014: Measuring financial inclusion around the world. World Bank.
Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2020). The Global Findex Database 2017: Measuring financial inclusion and opportunities to expand access to and use of financial services. The World Bank Economic Review, 34(Supplement_1), S2–S8.
Demirgüç-Kunt, A., Klapper, L., Singer, D., & Van Oudheusden, P. (2017). The global Findex database 2017: Measuring financial inclusion and the fintech revolution (Policy Research Working Paper No. 8153). World Bank.
Demirgüç-Kunt, A., Klapper, L. F., Singer, D., & Van Oudheusden, P. (2018). The global Findex database 2017: Measuring financial inclusion and the fintech revolution. World Bank.
Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2020). The Global Findex Database 2017: Measuring financial inclusion and opportunities to expand access to and use of financial services. The World Bank Economic Review, 34(Supplement_1), S2–S8.
Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2022). The Global Findex Database 2021: Financial inclusion, digital payments, and resilience in the age of COVID-19. World Bank.
Dusuki, A. (2008). Banking for the poor: The role of Islamic banking in microfinance initiatives. Humanomics, 24(1), 49--66.
Emara, N., & El Said, A. (2021). Financial inclusion and economic growth: The role of governance in selected MENA countries. International Review of Economics & Finance, 75, 34–54.
Erlando, A., Riyanto, F. D., & Masakazu, S. (2020). Financial inclusion, economic growth, and poverty alleviation: Evidence from Eastern Indonesia. Heliyon, 6(10), e05235.
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2019). Multivariate data analysis (8th ed.). Cengage Learning.
Hasan, Z., Paltrinieri, A., Dreassi, A., Miani, S., & Migliavacca, M. (2020). Islamic finance and inclusive growth: The role of Islamic banking in development. Journal of Islamic Accounting and Business Research, 11(3), 473--492.
Honohan, P. (2008). Cross-country variation in household access to financial services. World Bank.
Huang, Y., & Wang, X. (2017). Building an efficient financial system in China: The role of digital finance. Asian Economic Papers, 16(2), 1–27.
Islamic Financial Services Board. (2023). Islamic Financial Services Industry Stability Report 2023. IFSB.
Jack, W., & Suri, T. (2014). Risk sharing and transactions costs: Evidence from Kenya's mobile money revolution. American Economic Review, 104(1), 183–223.
Jungo, J., Madaleno, M., & Botelho, A. (2022). The effect of financial inclusion and competitiveness on financial stability: Why financial regulation matters in developing countries. Journal of Risk and Financial Management, 15(3), 122.
King, R. G., & Levine, R. (1993). Finance and growth: Schumpeter might be right. Quarterly Journal of Economics, 108(3), 717–737.
Kuznets, S. (1955). Economic growth and income inequality. American Economic Review, 45(1), 1–28.
Levine, R. (2005). Finance and growth: Theory and evidence. In P. Aghion & S. Durlauf (Eds.), Handbook of economic growth (Vol. 1, pp. 865–934). Elsevier.
Loo, M. Y. (2019). Enhancing financial inclusion in ASEAN: Policies, institutions, and products. ISEAS–Yusof Ishak Institute.
Mehry, E., Ahmed, R., & Sayed, H. (2021). The impact of financial inclusion on unemployment rate in developing countries. International Journal of Economics and Finance, 13(4), 22–35.
Modigliani, F. (1966) The Life Cycle Hypothesis of Savings, the Demand for Wealth and the Supply of Capital. Social Research, 33, 160-217.
Mohieldin, M., Iqbal, Z., Rostom, A., & Fu, X. (2012). The role of Islamic finance in enhancing financial inclusion in OIC countries (World Bank Policy Research Working Paper No. 5920). World Bank.
Molefhi, K. (2019). The impact of financial inclusion on employment creation in Botswana (2004–2016) (Master's dissertation, University of Botswana).
Naceur, S. B., Ghazouani, S., & Omran, M. (2019). Finance and unemployment: New panel evidence. Economic Research-Ekonomska Istraživanja, 32(1), 307–324.
Nisreen Emara, N., & Ali El Said, A. (2021). Financial inclusion and economic growth: The role of governance in selected MENA countries. International Review of Economics & Finance, 75, 34–54.
Ong, H. B., Chong, L. L., & Tan, S. H. (2023). Financial inclusion and digital financial services in ASEAN: Trends, milestones, and policy shifts. Asian Economic Journal, 37(1), 45–69.
Ozili, P. K. (2020). Theories of financial inclusion. In E. Ozen & S. Grima (Eds.), Uncertainty and challenges in contemporary economic behaviour (pp. 89–115). Emerald Publishing.
Park, C. Y., & Mercado, R. V. (2015). Financial inclusion, poverty, and income inequality in developing Asia (ADB Economics Working Paper Series No. 426). Asian Development Bank.
Pg Md Salleh, A. M. H. A. (2015). Integrating financial inclusion and saving motives into institutional zakat practices: A case study on Brunei. International Journal of Islamic and Middle Eastern Finance and Management, 8(2), 150–170.
Reserve Bank of India. (2019). Report on trend and progress of banking in India. Reserve Bank of India.
Rillo, A. D. (2018). ASEAN financial integration: Opportunities, risks, and challenges (ADBI Working Paper No. 814). Asian Development Bank Institute.
Romer, P. M. (1994). The Origins of Endogenous Growth. Journal of Economic Perspectives, American Association, 8, 3-22.
Sahay, R., Čihák, M., N'Diaye, P., Barajas, A., & Spence, M. (2015). Rethinking financial inclusion. International Monetary Fund.
Sarma, M., & Pais, J. (2011). Financial inclusion and development. Journal of International Development, 23(5), 613–628.
Sharma, A., & Kukreja, S. (2013). An Analytical Study: Relevance of Financial Inclusion for Developing Nations. International Journal of Engineering and Science, 2, 15-20.
Sun, Y., & Siagian, P. (2015). Financial Inclusion in Indonesia and Its Challenges. Pertanika Journal of Social Science and Humanities, 23(S), 85-96.
Tan, G. K. S. (2022). Citizens go digital: A discursive examination of digital payments in Singapore's Smart Nation project. Urban Studies, 59(3), 617–636.
United Nations. (2023). Sustainable development goals: Financial inclusion. United Nations Department of Economic and Social Affairs. https://sdgs.un.org
World Bank. (2023). Digital Progress and Trends Report 2023. World Bank. https://doi.org/10.1596/978-1-4648-2049-6
World Bank. (2025). The global Findex database 2025: Connectivity and financial inclusion in the digital economy. World Bank.
World Bank & Islamic Development Bank Group. (2017). Global report on Islamic finance: Islamic finance -- A catalyst for shared prosperity? World Bank.
Younas, I., Cheng, J., Bhattarai, M. A., & Rehman, A. (2022). Financial inclusion, the shadow economy and economic growth in developing economies. Structural Change and Economic Dynamics, 62, 613–621.
Yunus, M. (2007). Creating a world without poverty: Social business and the future of capitalism. PublicAffairs.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2026 Fazlee Sulaiman, Ahmad Rizal Mazlan
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution (CC-BY) 4.0 License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
