Leveraging Digital Banking to Enhance Financial Inclusion in Small Island Developing States: A Study of Fiji

This study empirically examines the relationship between digital banking and financial inclusion in Fiji, a small island developing state with geographically dispersed populations and limited access to traditional banking infrastructure. Using annual panel data from eight financial institutions—six commercial banks and two non-bank financial institutions—covering 2012–2024, the analysis accounts for cross-sectional dependence, heteroskedasticity, and serial correlation through Driscoll–Kraay panel-corrected standard errors, while robustness checks using the generalized method of moments (GMM) address potential endogeneity concerns. The results indicate that digital banking is positively associated with higher levels of financial inclusion in Fiji. Both the baseline model, which includes only digital banking, and the extended model, which incorporates banking-sector and macroeconomic controls, show consistent associations. From a policy perspective, the findings provide empirical support for strengthening digital financial infrastructure and regulatory frameworks to promote inclusive finance in small island economies. Overall, the study contributes to the limited empirical literature on digital finance in such contexts and offers insights for policymakers and financial institutions seeking to expand financial inclusion.