Exploring the Link Between Financial Inclusion and Social Well-Being: Global Evidence

Abstract

This article deals with the critical challenge of financial inclusion and its impact on social welfare based on inequality at a global level that affects individuals and societies. Using data from 60 countries between 2010 and 2022, this study uses a two-step system GMM estimation with the support of Stata software to address potential endogeneity issues. Key findings indicate that financial inclusion (defined as the access to and use of formal financial services) promotes the social pillar of sustainability through enhancing the Human Development Index (HDI) and voter turnout. However, it seems that financial inclusion alone is not sufficient. In the absence of adequate financial literacy—the ability to understand and effectively use financial information—individuals may face unintended consequences such as over-indebtedness or poor financial choices that can undermine well-being. Importantly, this paper highlights that financial inclusion influences not only individual behavior in improving personal well-being but also shapes individuals' societal roles by encouraging greater participation in civic activities such as voting. This dual impact underscores financial inclusion's transformative role in fostering personal development and community engagement. This study provides actionable insights for policymakers, recommending financial literacy programs, responsible lending policies, and governance improvements to create inclusive, equitable, and sustainable societies.