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<p>Despite significant advances in digital finance and financial sector development, substantial disparities in financial inclusion persist across countries, particularly in politically unstable environments. Existing studies have largely examined financial inclusion through broad institutional quality measures, leaving the independent role of political stability insufficiently understood. This study investigates the impact of political stability on financial inclusion across 75 countries over the period 2014–2024. Financial inclusion is measured using a multidimensional Composite Financial Inclusion Index (CFII) based on Sarma’s (2012) framework, incorporating the dimensions of availability, accessibility, and usage of financial services. The study employs secondary panel data obtained from the World Bank, Worldwide Governance Indicators, International Monetary Fund, and other international databases. To address endogeneity, dynamic persistence, and unobserved heterogeneity, the analysis applies the two-step System Generalized Method of Moments (System-GMM) estimator. The findings reveal that political stability has a significant positive effect on financial inclusion by promoting regulatory continuity, institutional trust, and financial sector development. Economic growth, trade openness, mobile accessibility, financial literacy, urbanization, and financial depth also positively influence financial inclusion, whereas inflation exerts a significant negative effect. Among these determinants, mobile accessibility demonstrates one of the strongest positive impacts, underscoring the growing importance of digital financial infrastructure in expanding inclusive financial services. The study contributes to the literature by isolating political stability as a distinct political determinant within a dynamic panel framework while employing a multidimensional measure of financial inclusion. The findings provide important policy insights for governments and financial regulators seeking to strengthen financial inclusion through enhanced political stability, macroeconomic resilience, and digital financial transformation.</p>

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From politics to finance: the role of political stability in advancing financial inclusion

  • 期刊论文

  • 发表日期：

    2026年7月30日

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  • Animesh Saha,
  • Pranesh Debnath

摘要

Despite significant advances in digital finance and financial sector development, substantial disparities in financial inclusion persist across countries, particularly in politically unstable environments. Existing studies have largely examined financial inclusion through broad institutional quality measures, leaving the independent role of political stability insufficiently understood. This study investigates the impact of political stability on financial inclusion across 75 countries over the period 2014–2024. Financial inclusion is measured using a multidimensional Composite Financial Inclusion Index (CFII) based on Sarma’s (2012) framework, incorporating the dimensions of availability, accessibility, and usage of financial services. The study employs secondary panel data obtained from the World Bank, Worldwide Governance Indicators, International Monetary Fund, and other international databases. To address endogeneity, dynamic persistence, and unobserved heterogeneity, the analysis applies the two-step System Generalized Method of Moments (System-GMM) estimator. The findings reveal that political stability has a significant positive effect on financial inclusion by promoting regulatory continuity, institutional trust, and financial sector development. Economic growth, trade openness, mobile accessibility, financial literacy, urbanization, and financial depth also positively influence financial inclusion, whereas inflation exerts a significant negative effect. Among these determinants, mobile accessibility demonstrates one of the strongest positive impacts, underscoring the growing importance of digital financial infrastructure in expanding inclusive financial services. The study contributes to the literature by isolating political stability as a distinct political determinant within a dynamic panel framework while employing a multidimensional measure of financial inclusion. The findings provide important policy insights for governments and financial regulators seeking to strengthen financial inclusion through enhanced political stability, macroeconomic resilience, and digital financial transformation.