‏ The Financial Inclusion and Unemployment in Urban and Rural Areas of Iran

The paper aims to investigate the financial inclusion effect on the unemployment rate in urban and rural areas of Iran. Panel generalized method of moments and provincial data from 2015 to 2020 used to analyze the relationships between variables. Findings show that financial inclusion leaves a negative and significant effect on the unemployment rate in urban and rural areas of Iran. On the one hand, financial inclusion increases entrepreneurs’ and economic firms’ access to financial credits by reducing transaction costs and by increasing information transparency, which in turn leads to an increase in production capacity and a decrease in the unemployment rate; On the other hand, increasing the access of low-income people to borrowing leads to an increase in investment in human capital and, as a result, a decrease in the unemployment rate. Also, economic growth and human capital have a negative significant effect, and the real wage has a significant positive effect on the unemployment rate in urban and rural areas of Iran. According to the research results, in order to use the benefits of financial inclusion to reduce unemployment in the country, it is necessary to adopt effective policies in the field of training and increasing the financial literacy of individuals in deprived areas to participate in the financial sector, increasing investment to promote innovative financial technologies, expanding banking hardware and improving the infrastructure of the payment system.