Policy-driven financial access shrinks gender and rich–poor disparities

A groundbreaking new study published in the International Journal of Financial Studies offers robust empirical evidence that countries investing in financial inclusion beyond their expected economic capacity see significant reductions in both gender-based and income-group disparities.

The research, titled “Does Disproportionate Financial Inclusion Reduce Gender and Income-Group Inequality? Global Evidence”, spans 100 countries across three waves of World Bank data (2014, 2017, 2021), and introduces a novel metric, the Abnormal Financial Inclusion Index (AbFII), to isolate the component of financial inclusion effort that exceeds predictions based on GDP per capita.

Can financial inclusion target inequality gaps beyond economic growth?

The study assesses whether national-level, disproportionately high financial inclusion efforts, beyond what economic growth would dictate, can reduce persistent financial access gaps across genders and income groups. The AbFII, constructed as the residual from a regression of financial inclusion on GDP per capita, acts as a proxy for unexpected or policy-driven efforts by a state to promote inclusive finance.

This approach resolves a long-standing issue in financial development studies: disentangling the effects of financial inclusion from those of income level. The authors demonstrate that AbFII is uncorrelated with GDP, validating it as a distinct measure of inclusion-related policy effort.

Results show that a one standard deviation increase in AbFII corresponds to approximately a 1.2 percentage point drop in gender gaps and rich-poor disparities across core financial indicators such as digital payment use, bank account ownership, and access to formal financial institutions. These effects are both statistically significant and economically meaningful, particularly in low-income nations and high-inequality environments.

Notably, gender and income-based financial access gaps, which initially narrowed between 2014 and 2017, have widened again by 2021, suggesting that inclusive progress can stall or reverse without sustained and targeted efforts. The post-2017 deterioration, according to the authors, may be linked to policy shifts that expanded overall access without addressing demographic disparities.

Which inequality dimensions respond best to policy-driven financial inclusion?

The research uncovers asymmetries in how gender and income disparities respond to abnormal financial inclusion efforts. Using lagged regression models, the study finds that AbFII significantly narrows inequality in access-based financial services, like account ownership and digital payments, but has weaker or non-significant effects on usage-based services such as saving and borrowing.

For gender inequality, the most responsive indicators include digital payment usage, financial institution account ownership, and credit/debit card access. The link is especially pronounced in nations with higher baseline gender inequality, indicating that such environments may benefit most from over-performing in financial inclusion.

In the case of income-group inequality, AbFII’s impact is even more potent. Rich-poor gaps across all access-oriented financial indicators respond significantly to increases in AbFII, with greater effect sizes than those found in gender-based gaps. Interestingly, unlike the gender dimension, the responsiveness of rich-poor inequality to AbFII does not vary much based on the country's existing income inequality levels. This suggests that income-based disparities in financial access are broadly addressable through policy-driven financial inclusion, regardless of a nation’s starting point.

To further reinforce the findings, the authors deploy a two-stage least squares (2SLS) model using broadband internet penetration as an instrument for AbFII. The results remain consistent, affirming the causal interpretation of the relationship between excess financial inclusion and reduced inequality in financial access.

Do these gains spill over into broader social equality?

Beyond financial metrics, the study also tests whether AbFII-driven improvements in inclusion lead to broader societal gains, specifically in gender inequality. Here, the research turns to the UNDP’s Gender Inequality Index (GII), which incorporates reproductive health, empowerment, and labor market participation.

The results are compelling: countries with higher AbFII scores show significant improvement in GII scores three years later, with the most notable gains concentrated in reproductive health outcomes. A one standard deviation increase in AbFII leads to a seven-position improvement in the global gender equality ranking, according to the authors’ estimates.

While gains in female education, political representation, and labor participation were not statistically significant within the three-year observation window, the study attributes this to structural lag effects and measurement constraints. For instance, metrics based on women aged 25 and older are unlikely to reflect short-term changes following improved financial access.

The authors caution that while AbFII reflects outcomes rather than direct investments, its alignment with known policy interventions, such as Thailand’s PromptPay initiative, strengthens its validity as a proxy for targeted inclusion strategies. The Thai example is particularly illustrative: with a high AbFII, Thailand saw a dramatic reduction in its gender gap in digital payments between 2017 and 2021, aligning with its nationwide push toward digital financial infrastructure.

Policy takeaways: Beyond access, toward equity

The study’s findings carry significant implications for global policy agendas, especially in the context of the UN’s Sustainable Development Goals 5 (gender equality) and 10 (reducing inequality). The evidence suggests that equalizing financial access is not a natural byproduct of economic development. Instead, it requires disproportionate and intentional policy efforts.

Governments seeking to close inclusion gaps should:

• Invest in digital infrastructure that supports inclusive fintech adoption;
• Develop targeted programs for women and low-income groups;
• Integrate financial access strategies with broader social policy objectives, especially in health and education.

Moreover, donor organizations and development banks should consider conditioning support on measurable improvements in AbFII or similar metrics, thereby incentivizing policy effort rather than just GDP-linked benchmarks.

For corporate stakeholders, the research invites further exploration into how equitable financial systems can support broader goals such as employee welfare, social license to operate, and inclusive market growth.