Does higher financial inclusion lead to better health outcomes? Evidence from developing and transitional economies

Abstract

This study critically examines the effect of financial inclusion on life expectancy and infant mortality rates, and whether the effect is conditioned by possible threshold effects determined by the degree of income inequality and poverty levels. We draw our conclusions based on 61 developing and transitional economies in the period 2011–2017. Using an aggregate hybrid financial inclusion index, we show that financial inclusion exerts a direct positive effect on health outcomes. Furthermore, the effectiveness of financial inclusion as a policy tool to achieve better health outcomes is higher in societies where poverty and income inequality are more prevalent. These are significant findings from a policy perspective as greater financial inclusion offers the scope to invest in health capital and enhances the capacity for risk management among the most vulnerable populations in the face of health shocks.