This study investigates the impact of institutional quality on financial inclusion across G20 economies. It further examines structural heterogeneity by comparing developed and emerging economies, thereby offering context-specific insights into how governance, economic and technological factors shape financial inclusion outcomes. The article constructs a financial inclusion index based on availability, accessibility and usage, providing a comprehensive view of financial inclusion. Similarly, the institutional quality index is computed using six indicators. The study utilises data on 81 G20 countries, including the newly inducted African Union, from the World Bank and the International Monetary Fund for the period from 2014 to 2022. Dynamic system-generalised method of moments panel estimation is applied to address endogeneity, persistence and unobserved heterogeneity. Additionally, separate regressions are conducted for developed and emerging G20 economies to capture differential effects. The results indicate that institutional quality has a significant and positive impact on financial inclusion. Similarly, other macroeconomic variables, such as economic growth, trade openness and mobile accessibility, positively impact the level of financial inclusion. However, inflation, government expenditure and internet accessibility have shown an insignificant impact on financial inclusion. Comparative analysis reveals that institutional effects are more pronounced in developed economies, whereas economic growth, trade openness and mobile penetration play a more significant role in emerging economies. This article integrates institutional and financial dimensions within a unified empirical framework using multidimensional indices and advanced dynamic estimation techniques. By differentiating between developed and emerging G20 members, the study provides nuanced insights and tailored policy recommendations, bridging a critical gap in comparative financial inclusion literature.

Financial inclusion, institutional quality, G20 economies, system-generalised method of moments

Acemoglu, D., Johnson, S., & Robinson, J. A. (2005). Institutions as a fundamental cause of long-run growth. Handbook of Economic Growth, 1, 385–472. https://doi.org/10.1016/S1574-0684(05)01006-3

Aguera, P. (2015). Financial inclusion, growth and poverty reduction. ECCAS Regional Conference, Brazzaville, Congo, World Bank Group.

Ahmad, M., Kuldasheva, Z., Nasriddinov, F., Balbaa, M. E., & Fahlevi, M. (2023). Is achieving environmental sustainability dependent on information communication technology and globalization? Evidence from selected OECD countries. Environmental Technology & Innovation, 31, 103178. https://doi.org/10.1016/j.eti.2023.103178

Ajide, K. B., Raheem, I. D., Alimia, O. Y., & Asongu, S. A. (2020). The role of institutional infrastructures in financial inclusion–growth relations: Evidence from SSA. International Journal of Finance & Economics, 27, 175–191. https://doi.org/10.1002/ijfe.2145

Alhassan, A., Li, L., Reddy, K., & Duppati, G. (2021). The relationship between political instability and financial inclusion: Evidence from Middle East and North Africa. International Journal of Finance & Economics, 26(1), 353–371. http://dx.doi.org/10.1002/ijfe.1793

Allen, F., Carletti, E., Cull, R., Qian, J. Q., Senbet, L., & Valenzuela, P. (2014). The African financial development and financial inclusion gaps. Journal of African Economies, 23(5), 614–642. https://doi.org/10.1093/jae/eju015

Amidži, G., Massara, A., & Mialou, A. (2014). Assessing countries’ financial inclusion standing: A new composite index (IMF Working Paper 14/36). International Monetary Fund. https://www.imf.org/external/pubs/ft/wp/2014/wp1436.pdf

Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), 277–297.

Arun, T., & Kamath, R. (2015). Financial inclusion: Policies and practices. IIMB Management Review, 27(4), 267–287. https://doi.org/10.1016/j.iimb.2015.09.004

Asian Development Bank (ADB). (2013). Supporting good governance: A thematic evaluation study of ADB. https://www.adb.org/sites/default/files/evaluation-document

Banerjee, A. V., & Newman, A. F. (1993). Occupational choice and the process of development. Journal of Political Economy, 101(2), 274–298. http://www.jstor.org/stable/2138820

Beck, T. (2016). Financial inclusion—Measuring progress and progress in measuring. In The Fourth IMF Statistical Forum: Lifting the small boats: Statistics for inclusive growth. Cass Business School, City, University of London, CEPR, and CESifo. https://www.imf.org/external/np/seminars/eng/2016/statsforum/pdf/beck_paper.pdf

Bernabe, M. D. (2017). Redefining inclusive growth in Asia (Briefing Paper). Oxfam International. https://www.oxfam.org/en/research/redefining-inclusive-growth-asia

Boukhatem, J., & Moussa, F. B. (2023). Financial inclusion, institutional quality, and economic growth in MENA countries: Some evidence from panel cointegration. Macroeconomics and Finance in Emerging Market Economies, 18(2), 319–342. https://doi.org/10.1080/17520843.2023.2284455

Cámara, N., & Tuesta, D. (2014). Measuring financial inclusion: A multidimensional index (BBVA Research Working Paper 14/26). https://www.bbvaresear

Chakravarty, S. R., & Pal, R. (2013). Financial inclusion in India: An axiomatic approach. Journal of Policy Modeling, 35(5), 813–837. https://doi.org/10.1016/j.jpolmod.2012.12.007

Chatterjee, A. (2020). Financial inclusion, information and communication technology diffusion, and economic growth: A panel data analysis. Information Technology for Development, 26(3), 607–635. https://doi.org/10.1080/02681102.2020.1734770

Chu, L. K., Minh, P. N., & Huong, T. H. D. (2019). Determinants of financial inclusion: New evidence from panel data analysis. SSRN Electronic Journal. https://ssrn.com/abstract

Cull, R., Demirgüç-Kunt, A., & Lyman, T. (2012). Financial inclusion and stability: What does research show? World Bank Group. https://documents.worldbank.org/

Demirguc-Kunt, A., & Klapper, L. (2012). Measuring financial inclusion: The Global Findex Database (Policy Research Working Paper No. 6025). World Bank. https://elibrary.worldbank.org/doi/abs/10.1596/1813-9450-6025

Demirguc-Kunt, A., & Maksimovic, V. (1998). Law, finance and firm growth. Journal of Finance, 53(6), 2107–2137. https://doi.org/10.2139/ssrn.139825

Eldomiaty, T., Hammam, R., & El Bakry, R. (2020). Institutional determinants of financial inclusion: Evidence from world economies. International Journal of Development Issues, 19(2), 217–228. https://doi.org/10.1108/IJDI-08-2019-0147

Evans, O. (2018). Connecting the poor: The internet, mobile phones and financial inclusion in Africa. Digital Policy, Regulation and Governance, 20(6), 568–581. http://dx.doi.org/10.1108/DPRG-04-2018-0018

Fakher, H. A., Panahi, M., Emami, K., Peykarjou, K., & Zeraatkish, S. Y. (2021). New insight into examining the role of financial development in economic growth effect on a composite environmental quality index. Environmental Science and Pollution Research, 28(43), 61096–61114. https://doi.org/10.1007/s11356-021-15047-2

Global Partnership for Financial Inclusion (GPFI). (2020). About GPFI. https://www.gpfi.org/about-gpfi

Hassan, A. S., Kot, S., & Meyer, D. F. (2019). Effect of institutional quality and wealth from oil revenue on economic growth in oil-exporting developing countries. Sustainability, 11(13), 3635. https://doi.org/10.3390/su11133635

Ifediora, C., Offor, K. O., Eze, E. F., Takon, S. M., Ageme, A. E., Ibe, G. I., & Onwumere, J. U. (2022). Financial inclusion and its impact on economic growth: Empirical evidence from sub-Saharan Africa. Cogent Economics & Finance, 10(1), 2060551.

Inoue, T. (2019). Financial inclusion and poverty reduction in India. Journal of Financial Economic Policy, 11(1), 21–33. http://dx.doi.org/10.1108/JFEP-01-2018-0012

Kaufmann, D., Kraay, A., & Mastruzzi, M. (2011). The Worldwide Governance Indicators: Methodology and analytical issues. Hague Journal on the Rule of Law, 3(2), 220–246. https://doi.org/10.1017/S1876404511200046

Kiviet, J. F., & Kripfganz, S. (2021). Instrument approval by the Sargan test and its consequences for coefficient estimation. Economics Letters, 205, 109935.

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1997). Legal determinants of external finance. Journal of Finance, 52(3), 1131–1150. http://dx.doi.org/10.1111/j.1540-6261.1997.tb02727.x

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1998). Law and finance. Journal of Political Economy, 106(6), 1113–1155. https://doi.org/10.1086/250042

La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (1999). The quality of government. Journal of Law, Economics, and Organization, 15(1), 222–279. https://scholar.harvard.e.pdf

Lenka, S. K., & Bairwa, A. K. (2016). Does financial inclusion affect monetary policy in SAARC countries? Cogent Economics & Finance, 4(1). https://doi.org/10.1080/23322039.2015.1127011

Lenka, S. K., & Barik, R. (2018). A discourse analysis of financial inclusion: Post liberalization mapping in rural and urban India. Journal of Financial Economic Policy, 10(2), 210–226. https://doi.org/10.1108/JFEP-11-2015-0065

Levine, R. (1997). Financial development and economic growth: Views and agenda. Journal of Economic Literature, 35(2), 688–726. http://www.jstor.org/stable/2729790

Mani, M. (2016). Financial inclusion in South Asia—Relative standing, challenges and initiatives. South Asian Survey, 23(2), 158–179. http://dx.doi.org/10.1177/0971523118783353

Nawaz, S., Iqbal, N., & Khan, M. A. (2014). The impact of institutional quality on economic growth: Panel evidence. The Pakistan Development Review, 53(1), 15–31. http://dx.doi.org/10.30541/v53i1pp.15-31

Ndoricimpa, A. (2017). Threshold effects of inflation on economic growth in Africa: Evidence from a dynamic panel threshold regression approach (Working Paper Series No. 249). African Development Bank. https://www.afdb.org/sites/default/files/documents/publications

Nguyen, T. T. H. (2020). Measuring financial inclusion: A composite FI index for the developing countries. Journal of Economics and Development, 23(1), 77–99. https://doi.org/10.1108/JED-03-2020-0027

Nkoa, B. E. O., & Song, J. S. (2020). Does institutional quality affect financial inclusion in Africa? A panel data analysis. Economic Systems, 44(4), 100836. https://doi.org/10.1016/j.ecosys.2020.100836

North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge University Press. https://doi.org/10.1017/CBO9780511808678

Nsiah, A. Y., & Tweneboah, G. (2023). Determinants of financial inclusion in Africa: Is institutional quality relevant? Cogent Social Sciences, 9(1). https://doi.org/10.1080/23311886.2023.2184305

Omar, M. A., & Inaba, K. (2020). Does financial inclusion reduce poverty and income inequalities in developing countries? A panel data analysis. Economic Structures, 9, 37. https://doi.org/10.1186/s40008-020-00214-4

Ozili, P. K. (2018). Impact of digital finance on financial inclusion and stability. Borsa Istanbul Review, 18(4), 329–340. https://doi.org/10.1016/j.bir.2017.12.003

Qamruzzaman, M., & Wei, J. (2018). Financial innovation, stock market development, and economic growth: An application of ARDL model. International Journal of Financial Studies, 6(3), 69.

Saha, M., & Dutta, K. D. (2022). Does governance quality matter in the nexus of inclusive finance and stability? China Finance Review International, 13(1), 121–139. https://doi.org/10.1108/CFRI-08-2021-0166

Sahay, R., Cihak, M., N’Diaye, P. M., Barajas, A., Mitra, S., Kyobe, A., Mooi, Y. N., & Yousefi, S. R. (2015). Financial inclusion: Can it meet multiple macroeconomic goals? (IMF Staff Discussion Note 15/17). International Monetary Fund. https://www.imf.org/external/pubs/ft/sdn/2015/sdn1517.pdf

Sarma, M. (2008). Index of financial inclusion (ICRIER Working Paper No. 215). Indian Council for Research on International Economic Relations. https://www.icrier.org/pdf/Working_Paper_215.pdf

Sarma, M. (2012). Index of financial inclusion: A measure of financial sector inclusiveness (Working Paper). Jawaharlal Nehru University. https://Finance_Trade_Development/working_paper_series/wp_07_2012_Sarma_Index-of-Financial-Inclusion.pdf

Sharma, D. (2016). Nexus between financial inclusion and economic growth: Evidence from the emerging Indian economy. Journal of Financial Economic Policy, 8(1), 13–36. https://doi.org/10.1108/JFEP-01-2015-0004

Shaw, E. S. (1973). Financial deepening in economic development. Oxford University Press.

Stakic, N., Barjaktarivic, L., & Singh, D. (2021). Key determinants of financial inclusion: Empirical evidence from Western Balkan countries. In Financial inclusion in emerging markets (pp. 49–69). Springer. https://doi.org/10.1007/978-981-16-2652-4-3

Tran, O. K. T., Le, H. D., & Nguyen, A. H. V. (2021). Role of institutional quality in economic development: A case study of ASEAN countries. Problems and Perspectives in Management, 19(2), 303–312. http://dx.doi.org/10.21511/ppm.19(2).2021.29

United Nations Development Programme. (2015). Governance for sustainable human development.

Van, L. T., Nguyen, N. T., Nguyen, H. L., & Vo, D. H. (2022). The asymmetric effects of institutional quality on financial inclusion in the Asia-Pacific region. Heliyon, 8(12), e12016. https://doi.org/10.1016/j.heliyon.2022.e12016

Verhoef, G. Hidden. (2022). Savings groups in South Africa. In Transforming Africa. Emerald.

World Bank. (2014). Global financial development report 2014: Financial inclusion.

Zadek, S., & Robins, N. (2018). Making waves: Aligning the financial system with sustainable development. United Nations Environment Programme. https://www.unepfi.org/publications/

Zhou, P., Su, M., & Zheng, Y. (2023). Economics of institutional quality in the nexus of innovation, technology, and financial market development: International evidence. Applied Economics Letters, 32(5), 715–720. https://doi.org/10.1080/13504851.2023.2288033