Impact of digital financial inclusion on environmental sustainability in Asian economies

Abstract Digital financial inclusion (DFI) is essential to ensure that everyone has access to financial services and insurance products thus promoting sustainable development. It helps to achieve the UN SDGs goals by 2030. However, this study uncovers a paradox: while DFI aims to promote sustainability, our empirical analysis of selected Asian economies from 2000 to 2023 reveals that greater DFI is associated with increased carbon dioxide (CO2) emissions. Utilizing the generalized method of moments (GMM) and panel quantile regression, we find that economic growth, foreign direct investment, and energy consumption further exacerbate emissions, supporting the pollution-haven hypothesis. In contrast, inflation and technological advancement contribute positively to environmental sustainability. Thus, policymakers in the Asian economies should align their strategies in such a way as to prevent the unintended consequences of increased carbon emissions associated with higher digital financial inclusion. The financial services and digital infrastructure should be improved to fully capture DFI’s gains and enhance economic growth and environmental sustainability.