CAN FINANCIAL INCLUSION REDUCE GENDER INEQUALITY? DYNAMIC PANEL EVIDENCE FROM DEVELOPING COUNTRIES

Abstract

Household studies show that women who gain a bank account or a savings product often gain more say over household spending but it is less clear whether wider financial access narrows gender gaps across a whole economy. This study examines the effect of financial inclusion on the UNDP Gender Inequality Index (GII) in 36 developing countries over 2000-2025. Financial inclusion is measured by an index built through principal component analysis from six IMF Financial Access Survey indicators, including mobile money agent outlets. Because gender inequality changes slowly and may itself affect access to finance, we estimate dynamic models with one-step and two-step difference and system GMM. Financial inclusion lowers the GII in all four estimators, with a coefficient of -0.352 in the two-step system GMM. A 0.1 rise in the index reduces the GII by 0.035 points in the first year, and because inequality is persistent (lagged coefficient 0.726), the implied long-run reduction is about 0.128 points, slightly more than one standard deviation of the index in the sample. In standardised terms, only the length of compulsory schooling has a larger effect. Higher fertility raises gender inequality, while longer compulsory schooling, faster growth and better governance reduce it. Expanding women’s access to accounts and credit should be treated as a long-term gender policy and combined with education and legal reform.