Can Digital Banking Unlock Inclusive Economic Development? Evidence from an Emerging Economy

Financial inclusion and digital banking are essential components of economic modernization in developing nations, especially those undergoing swift technical advancement and increased access to financial services. The expansion of mobile financial services (MFS), agent banking, and digital payment networks in Bangladesh has transformed the interactions between individuals, businesses, and the financial system. Notwithstanding this swift advancement, empirical data connecting financial inclusion and digital banking to overarching economic progress remains scarce. This study seeks to analyze the effects of financial inclusion and digital banking on economic development in Bangladesh from 2011 to 2024, a period characterized by the extensive adoption of mobile banking, agent banking, and digital transactions. This study utilizes secondary data from Bangladesh Bank, the World Bank Global Financial Inclusion Database (Findex), and various ICT and macroeconomic reports. It employs descriptive analysis, correlation tests, and multiple regressions modeling to evaluate the impact of financial inclusion indicators and digital banking usage on economic development. The results indicate that financial inclusion, assessed through access to formal accounts, mobile banking utilization, and agent banking penetration, exerts a statistically significant positive influence on economic development, represented by GDP per capita and national financial deepening. Digital banking, evidenced by digital transaction volumes, mobile banking proliferation, and electronic payment growth, demonstrates a pronounced impact, suggesting that technology-driven financial systems promote economic efficiency, lower transaction costs, and increase financial inclusion. The findings validate that inclusive and digital financial systems are essential facilitators of development by enhancing resource allocation, promoting savings and investment, bolstering small company activities, and including marginalized communities into the formal economy. This study enhances the financial development literature by presenting quantitative evidence from a swiftly digitizing South Asian economy and suggests policy implications for fortifying digital financial ecosystems in Bangladesh.