Zahra Mohamed El Shlmani

This study examines the impact of financial inclusion, specifically the dimensions of access and usage, on income inequality and economic growth in 70 developing countries using data from 2014, 2017, and 2021. Drawing from multiple international databases, the study employs Partial Least Squares Structural Equation Modeling (PLS-SEM) to assess formative constructs of financial inclusion and to test the hypothesized relationships. Results show that financial access significantly reduces income inequality (β = –0.124, p < 0.05) and promotes economic growth (β = 0.261, p < 0.01). Similarly, financial usage has a negative effect on inequality (β = –0.223, p < 0.01) and a positive effect on growth (β = 0.412, p < 0.01). Among control variables, trade openness is associated with lower inequality, while population growth and corruption increase it; population growth also weakly hinders economic growth. The model explains 30.2% of the variance in income inequality and 45.6% in economic growth. The analysis distinguishes between upper-middle-income and lower-income groups, revealing that financial access is more impactful in wealthier developing countries, while usage is more influential in lower-income ones. These results underscore the need for income-specific policy design. To address concerns of generalization, additional descriptive country-level analysis was conducted for six selected countries, highlighting national-level variation in financial inclusion dynamics. Overall, the findings offer valuable insights for policymakers and international agencies seeking to design inclusive financial systems that support equitable growth and reduced inequality.