Digital Financial Inclusion and Financial Resilience: Evidence from Emerging Economies

Abstract

Purpose: This study examines whether digital financial inclusion is associated with financial resilience in the MINT emerging economies of Mexico, Indonesia, Nigeria and Türkiye. Method: A balanced country-level panel covering 2000-2025 was developed, resulting in 104 observations. Bank Z-score is a proxy for resilience, and the proportion of transactions in mobile and internet banking and internet use are indicators of digital financial inclusion. GDP growth, inflation, private-sector credit, trade openness, logged GDP per capita, and population growth are controlled. Fixed-effects and random-effects modelling are estimated, and then specified and diagnosed. Due to the presence of heteroskedasticity and first-order serial correlation, feasible generalised least-squares, with heteroskedastic panels, and panel-specific AR(1) disturbance errors constitute the main estimates. Results revealed that the use of the Internet was positively related to the Z score of the bank, while correcting for digital transaction value resulted in a non-statistically significant value. Private sector credit decrease is negatively related to resilience, while the positive relationship between logged GDP per capita and population growth are positively related to resilience. Policy implications: Policies should focus on the improvement of digital connectivity, cyber security, responsible credit expansion, and institutional capacity instead of adding to the typical focus on transaction growth and considering this as a proxy for resilience. The results point towards a need to ensure digital-inclusion policy meets with prudential supervision and economy-wide development goals.