Digital Financial Inclusion, Islamic Banking Stability and Sustainable Economic Growth

Abstract

In the current 4th industrial revolution, digital finance is at the forefront of banking infrastructure and sustainable economic growth. It is becoming the baseline in conventional and Islamic banks alike. However, both the negative and positive effects of financial inclusion bring the question of whether digital finance can be the solution. This study intends to examine the role of digital financial inclusion (DFI) in promoting sustainable economic growth through Islamic banking stability using the unbalanced panel data by deploying panel corrected standard errors and two-stage least square-instrument variable techniques. The study also aims to focus on the impact, prospect, and the challenges of DFI and how the proper application of DFI can bring sustainable financial growth to achieve the SDGs. Our results suggest that DFI endorsement may ensure sustainable economic growth and stability within banks, specifically Islamic banks, which is a step towards SDGs achievement.