Nexus Between Financial Inclusion and Economic Growth in Bangladesh (2004-2021): ARDL Approach

Research goals: The purpose of this paper is to assess the dynamic impact of financial inclusion on economic growth of the emerging economy of Bangladesh. Approach, Methodology, and Design: In this study Autoregressive Distributed Lag (ARDL) methods were utilized for analysis, focusing on investigating the primary research question using time series data spanning from 2004 to 2021. Research Findings: According to the analysis using the ARDL model, there is no significant relationship between financial inclusion and economic growth in Bangladesh, both in the short and long term. The study concludes that the development of financial institutions and improved usage to banking services does not significantly contribute to the country's economic progress. Despite this, financial inclusion appears to drive economic expansion, but its effectiveness is hindered by various factors such as the informal sector's prevalence and inadequate customization of financial services to meet the needs of lower-income groups. Research Limitation: The assessment of financial inclusion's effectiveness may be incomplete if solely based on the expansion of financial institutions and banking services, as other factors such as product diversity and utilization rates could provide more accurate measures, while external shocks and economic cycles could significantly influence the relationship between financial inclusion and economic growth. Theoretical Contribution/ Originality: The burgeoning position of Bangladesh's economy necessitates a thorough examination of initiatives for financial inclusion and their potential impact on GDP growth. Despite facing various obstacles and a noticeable lack of financial literacy among its citizens, there is a critical need to analyze the effectiveness of such efforts. This research embarks on an innovative investigation into the causal link between different indicators of financial inclusion and the economic progress of Bangladesh. Significantly, this study signifies a groundbreaking endeavor, supported by recent empirical evidence and collaborative efforts aimed at promoting financial inclusivity in the economic landscape of Bangladesh. The implications of this study are poised to provide substantial insights beneficial to both financial institutions and policymakers.