Branchless Banking and Inclusive Growth: Comparative Evidence from European Emerging Economies

The paper investigates digital and traditional finance-related inclusive growth relationships in 17 emerging European economies during the period 2005-2022. The research employs the Panels-corrected standard errors (PCSE) model and the instrumental-variable generalized method of moments (IV-GMM) approach. The study finds that a CEE region with a relatively higher number of ATMs, coupled with individuals using the internet for internet banking experiences higher levels of human development than the SEE region, which has a lower level of development of branchless banking channels. The study concludes that, while branchless banking generally benefits human development, its impact is limited. In fact, the effect branchless banking on inclusive growth is more significant in the CEE region due to the higher institutional capacity and developed digital infrastructure. Conversely, in the SEE region, underdeveloped institutions and initial stages of digital finance can only have negligible or even negative consequences. This implies the need to adopt complementary policies, with the hope that campaigning for the adoption of branchless banking will go hand in hand with the quest to reinforce institutions and digital literacy, so that any digital financial innovation is converted into sustainable and inclusive economic growth.