Financial inclusion is one of the key enablers of economic growth, poverty alleviation and consequently achieving inclusive growth. This paper examines the causality between financial inclusion and inclusive growth in Egypt during the period (2004–2022).
To achieve our aim, we first construct the financial inclusion index and a multidimensional inclusive growth index for Egypt using principal components analysis. Second, we use the Toda–Yamamoto test to examine the causality between the two indices.
The results reveal that the inclusive growth index experienced an upward trend over the study period, while the financial inclusion index has increased since 2018. The results of the Toda–Yamamoto test indicate bidirectional causality between financial inclusion and three of the sub-indices of inclusive growth, as well as the overall inclusive growth index.
The empirical evidence highlights that financial inclusion efforts will not achieve their targeted outcome unless a simultaneous inclusive growth strategy is conducted. Moreover, improving governance indicators is crucial to promoting inclusive growth.
Although the relationship between financial inclusion and economic growth has been widely investigated, its relationship with inclusive growth remains unexplored. The novelty of this study resides in constructing two composite indices of financial inclusion and inclusive growth in Egypt and testing the relationship between them.
The peer-review history for this article is available at: https://publons.com/publon/10.1108/IJSE-08-2024-0667
