This paper aims to investigate the impact of financial inclusion on sustainability in Middle East and North Africa (MENA) countries. This study tests also for the moderating role of financial institution efficiency (FIE).
The sample consists of 11 countries based on the availability of complete data for all variables over the period 2004–2022. This study uses real data from the IMF Financial Access Survey database to construct composite indices of financial inclusion (Sarma, 2015) and sustainable development goals (SDGs) index scores (Sachs et al., 2023). This study uses panel quantile regression modelling approach to set the different levels of impact of financial inclusion on sustainability.
The results of this study show persistent impact of financial inclusion on sustainability at all quantile distribution of sustainability with pronounced effect at extreme quantiles. The results show N-shaped impact at normal sustainability conditions that will be inverted at extreme tails of SDG scores as well. The results remain consistent after incorporating the moderating role of FIE. The moderating role exists with pronounced negative outcomes at the median and high quantiles but weakens at extreme high quantiles.
This empirical study on financial inclusion and sustainability offers valuable insights but also has certain limitations that can be marked in future research agendas as well as should be considered by the above-mentioned relevant parties. Here are some key policy limitations: Context-specific findings: results from one region may suffer from country differences regarding financial literacy, financial development and policy agendas on the public side or the institutional side. Also, the diverse needs of various demographic groups may not be adequately addressed in generalized studies with panel data. The time frame of this study may be extended to increase the generalization power of the study and comparability with other contexts. Overreliance on metrics: This study, like other existing studies, emphasizes quantitative metrics (based on real data from the financial inclusion survey of the World Bank) without exploring qualitative aspects such as user experience on behalf of security of online transactions and internet streams at the country level and future trends, such as technological advancements and resistance from financial institutions (mentioned above as banking commitment) that could affect financial inclusion or commitment to sustainability goals. Acknowledging these limitations is crucial, as they offer valuable guidance and orientation for all subsequent research.
Regarding policy implications, the results provide valuable insights to executives and financial regulatory authorities in making decisions related to financial inclusion and sustainability. It provides insights as well to academics either for their future research agenda or for their teaching activities that address financial literacy. It is decisive to curtail the adverse impacts of financial inclusion and management quality of banks to boost sustainability scores.
This study offers a novel perspective by addressing gaps in existing literature. This study addresses the potential moderating role of FIE in accordance with the definition of World Bank 2018 that emphasizes the concept of affordable access. It bears in mind potential differences between countries and conducts U- and N-shaped relationships in panel quantile regression modelling approach. Unlike previous research that focused on simple associations and environmental aspects, this paper incorporates social and economic and environmental dimensions of sustainability. By extending the Environmental Kuznets Curve hypothesis to encompass all SDGs, this study highlights the interplay between management quality of banks, financial development stages and sustainability, thereby adding significant value to empirical literature.
