Abstract:
Financial inclusion signifies the practice of granting access to financial services and credit to families, enterprises, and
administrations at reasonable prices. It encompasses measures designed to augment the utilization of official financial
offerings within the economic framework. This research employed an ex-post facto study design to evaluate data on elements
like banking penetration, usage of financial services, and access to financial services, concerning GDP growth. Relationships
and interactions among these factors were scrutinized using the Autoregressive Distributed Lag Model (ARDL), which
displayed strong explanatory capabilities and statistical validity. The research revealed that, without inputs from access to
financial services, the usage of financial services, and banking penetration, the self-sustaining gross domestic product (GDP)
is negative and statistically noteworthy. Over the short term, a negative link is observed between GDP and access to financial
services (AFS); however, in the long term, AFS manifests a positive correlation with real GDP (RGDP). The usage of
financial services (UFS) demonstrates a favorable relationship with GDP, accentuating the necessity of bolstering financial
literacy and inspiring individuals and enterprises to effectively make use of financial services. The existing phase of banking
penetration (BP) exerts a negligible impact on economic growth, but it is vital for policymakers to persistently observe and
evaluate its long-term influence. Upholding a facilitative regulatory setting and stimulating rivalry within the banking sector
are essential for enduring economic development. The regression analysis furnishes policy suggestions aimed at amplifying
access to finance, boosting financial literacy, and confronting issues related to banking penetration. By tackling constraints
that limit access to finance, upgrading infrastructure, and diminishing entry obstacles, sustainable economic growth can be
achieved. Advocating for financial literacy and encouraging the adoption of financial services have the potential to elevate
economic activities and spur GDP growth. Even though the current influence of banking penetration is not significant, it
remains crucial for policymakers to keep track of and analyze its future implications.
