Abstract
This paper examines the corresponding roles of Traditional Financial Inclusion (TFI) and Digital Financial Inclusion (DFI) in driving socio-economic development across 97 developed and developing countries in 2014, 2017, and 2021. Most of the previous studies seem to deal only with the linear and non-linear relationships between financial inclusion and economic growth. In contrast, this study takes a multilayered approach by incorporating a Socio-Economic Development Index (SEDI). It analyzes the components of financial inclusivity, such as income, employment, and political stability, and how these factors contribute to social progress. The study ascertain show various dimensions of financial inclusion influence economic development by creating unique indices for TFII, DFII, and a combined Financial Inclusion Index (FII).Moreover, the paper utilizes a threshold estimation model to identify the key points where financial inclusion yields optimal socio-economic benefits. The results demonstrate that, thereby increasing savings and credit access as an agent of economic participation, the TFI is pivotal in countries with weaker financial systems. Meanwhile, DFI emerges as a powerful growth engine in economies with a strong digital infrastructure supporting mobile banking, fintech, and digital payment platforms for universal financial inclusion. Thus, the study advocates for an inclusive, multi-stakeholder approach to achieve sustainable financial inclusion. It underscores the requirement for investment in digital infrastructure to deepen financial inclusion and increasing focus on a progressive regulation that balances innovation with risk mitigation. This research offers crucial insights into how financial inclusion, in it straditional and digital forms, can serve as a prominent tool for equitable socio-economic development.
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