Bridging the gender gap: The impact of financial inclusion on gender inequality in developing countries

Abstract

This study examines whether Female Financial Inclusion (FFI) contributes to reducing gender inequality in developing countries. Using a panel dataset of 84 developing economies, the analysis combines the United Nations Development Programme’s Gender Inequality Index (GII) with female-specific indicators from the Global Findex database, including women’s account ownership and access to formal credit. The model also incorporates a set of macroeconomic and institutional control variables obtained from the World Development Indicators and the Worldwide Governance Indicators. A pooled ordinary least squares (OLS) estimation is employed, complemented by a mechanism analysis to identify two transmission channels: the female-to-male labor force participation ratio and the female-to-male school enrollment ratio.The empirical results indicate that higher levels of female financial inclusion are associated with lower gender inequality, with women’s access to formal credit exerting a significantly stronger effect than mere bank account ownership. Evidence from the proposed channels suggests that female financial inclusion promotes gender equality by enhancing women’s participation in the labor market and improving gender balance in education. Overall, the findings highlight female-oriented financial inclusion as a feasible and effective policy instrument for narrowing structural gender gaps in developing countries.