The Effect of Financial Inclusion on Financial Efficiency and sustainability: an Application of Multidimensional Indexing Approach

In the present study, the effect of financial inclusion on financial efficiency and financial sustainability in the period 2004-2018 for developing countries was studied using the multidimensional indexing method and two-stage GMM. Among domestic studies, no research has been done on the relationship between financial inclusion and financial efficiency and sustainability, and the present study is the first study, and there are limited related studies abroad due to the novelty of the subject.In this context, the results showed that financial inclusion has a positive and significant effect on financial sustainability (coefficient equal 0.009) and a negative and significant effect on financial efficiency (coefficient equal 0.009). Based on research empirical evidence, financial sustainability and financial inclusion can be achieved in the form of a common goal setting. In other words, policymakers, while maintaining the stability of the financial system, can achieve goals in which more people benefit from financial services. In contrast, the findings showed that measures and programs to develop financial inclusion can have side effects in the form of reduced financial efficiency. This is due to increased participation in financial markets, which ultimately leads to increased social costs of institutional deficits in each country.