Abstract

Abstract

The purpose of this paper is to assess the dynamic impact of financial inclusion on Bangladesh’s economic growth, an emerging economy. In this study, Autoregressive Distributed Lag (ARDL) methods were used for analysis, focusing on the primary research question using time-series data spanning 2004 to 2021. The ARDL analysis indicates no significant relationship between financial inclusion and economic growth in Bangladesh in the short- or long-term. The study concludes that the development of financial institutions and improved use of banking services do not significantly contribute to the country’s economic progress. Despite this, financial inclusion appears to drive economic expansion, but its effectiveness is hindered by factors such as the prevalence of the informal sector and the inadequate customization of financial services to meet the needs of lower-income groups. The assessment of financial inclusion’s effectiveness may be incomplete if solely based on the expansion of financial institutions and banking services, as other factors, such as product diversity and utilization rates, could provide more accurate measures, while external shocks and economic cycles could significantly influence the relationship between financial inclusion and economic growth. The burgeoning position of Bangladesh’s economy necessitates a thorough examination of initiatives for financial inclusion and their potential impact on GDP growth. Despite various obstacles and a noticeable lack of financial literacy among its citizens, there is a critical need to assess the effectiveness of these efforts. This research embarks on an innovative investigation into the causal link between indicators of financial inclusion and Bangladesh’s economic progress. Significantly, this study represents a groundbreaking endeavor, supported by recent empirical evidence and collaborative efforts to promote financial inclusivity in Bangladesh’s economic landscape. The implications of this study are poised to provide substantial insights beneficial to both financial institutions and policymakers.