Journal of Finance and Islamic Banking Vol.
8, no.
1, 2025
DOI: https://doi.
org/10.
22515/jfib.
Analyzing The Nexus Between Digital Financial Inclusion.
Economic Growth, and Environmental Sustainability Impact in ASEAN Region Nukman Taufik,1* Dwi Nastiti Danarsari 2 Faculty of Economics and Business.
Universitas Indonesia.
2 Faculty of Economics and Business.
Universitas Indonesia Abstract Purpose: This study aims to examine the impact of digital financial inclusionAiproxied by debit card usage and ATM availabilityAion both economic growth and environmental sustainability across 11 ASEAN member countries during the period from 2010 to 2023.
Method: Using panel data regression analysis, the study employs the Feasible Generalized Least Squares (FGLS) estimation method to analyze the relationship between financial inclusion, economic growth, and carbon emissions.
Results: The analysis reveals a positive and significant relationship between debit card penetration and economic growth, suggesting that greater digital financial access contributes to economic Conversely, the relationship between ATM availability and economic growth appears inconsistent.
Implication: These findings underscore the need for policymakers, financial regulators, and development agencies to design financial systems that not only promote growth but also incorporate environmental safeguards.
Originality: This research contributes to the literature by integrating digital financial inclusion metrics within an EKC framework to simultaneously evaluate economic and environmental outcomes in developing economies.
Keywords: Digital Financial Inclusion.
Economic Growth.
Environmental Sustainability.
Carbon Emissions.
Article History:
Received: 26 May 2025 Revised: 10 June 2025 Accepted : 29 June 2025 Copyright A2025 Journal of Finance and Islamic Banking This is an open access article under the terms and conditions of the Creative Commons Attribution-NonCommercialShareAlike 4.
0 International License.
How to cite (APAStyl.
Aiman.
Risfandy.
Aysan.
, & Saktiawan.
Islamic financing and firm performance: evidence from Indonesia.
Journal of Finance and Islamic Banking, 7.
, 1-20.
https://doi.
org/10.
21580/jiafr.
ACorresponding Author.
Email: nukman.
taufik@office.
Journal of Finance and Islamic Banking - Vol.
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Nukman Taufik et al.
Introduction As the world grapples with the urgent need to balance economic growth with the safeguarding of the environment, some developed countries have increasingly recognized the vital necessity of pursuing sustainable development strategies that simultaneously drive prosperity and preserve ecosystems (Ritchie 2.
This global shift towards sustainability is reflected in the International Agreements such as the Paris Conference on Parties (COP) In here, financial industries as the key drivers of economic growth were called to play a significant role in fostering environmental sustainability (Azoulay et al.
Historically, the financial sector has long been essential in developing economic growth by facilitating financing, investment, and economic stability (Regan and Paxton .
Kodan (Kablan.
and Chhikara .
Similarly, the positive impact of financial inclusion to the MSMEAos financing through Indonesian Islamic banking is demonstrated by Wibowo and Sriyana .
As the worldAos fifth largest economic bloc with aggregated GDP of US$3.
6 trillion in 2022.
ASEAN has consistently outpaced other global regions in economic growth, exceeding both the United States .
hich had a growth rate of 1.
1%) and the European Union .
ith a rate of 0.
5%) over the past ten years (Rasjid 2.
On the other side, from the financial sector point of view, the Global Findex 2021 data revealed that ASEAN also has experienced a rise in financial inclusivity, with figures jumping from 51% in 2011 to 76% in Malarvizhi et al.
explains that financial development in ASEAN-5 is proven to have a positive effect on economic levels.
Yet, those economic and financial data progress.
ASEAN continues to encounter considerable hurdles in its efforts to mitigate carbon emissions, as evidenced by data from OurWorldInData.
Furthermore, the influence of digital technology has become a pivotal force in financial services.
It streamlines procedures such as withdrawing money, payments, and loan requests using digital platforms, and it can also reduce the energy needed for transportation.
This transformation has led to the emergence of the notion of AuDigital Financial InclusionAy.
Given this context, this study is motivated by two key research objectives.
First, this study intends to examine how digital financial inclusion influences economic growth.
With the increasing digitalization of financial services, there is improved access to funding, investment opportunities, and financial services, especially for groups that have been previously underserved (Liu et al.
, 2021.
Ozili, 2.
Another objective is investigating the role of digital financial advancement in fostering environmental sustainability, particularly through the decrease of carbon emissions as the proxy of environmental sustainability.
There has been a growing recognition in recent years of the potential for financial systems to aid in achieving environmental objectives.
Previous studies written by J.
Wang et al.
and Tay.
Tai, and Tan .
have indicated that the financial industry can promote sustainability by supporting green initiatives and encouraging eco-friendly practices.
Even though, there is increasing number research which are studying the relationship between financial development, economic progression, and environmental sustainability (Tay.
Tai, and Tan 2022.
Wang et al.
, yet most of this research has concentrated on areas like East Asia and Africa, with Southeast Asia receiving relatively little focus.
The ASEAN region, characterized by its diverse economies and differing environmental Journal of Finance and Islamic Banking - Vol.
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Analyzing the Nexus regulations, presents a distinctive setting to examine how financial inclusion interacts with economic growth and ecological consequences.
This study aims to fill this gap by investigating how digital financial inclusion can help decouple economic growth from environmental harm.
ASEAN presents an ideal context for this research due to its strong economic performance over the past decade and its demonstrated resilience during global Nowadays, the industry provides a wide range of digital financial services such as ewallets, mobile banking, until cryptocurrencies.
Even though, not all products are not uniformly available or mature across all ASEAN countries.
Majority members are transitioning from cash-based to digital as the medium of exchange.
As used by Ozturk and Ullah .
ATMs and debit cards could offer a standardized representation of digital financial inclusion regardless levels of technological development.
In this study.
ATMs and debit cards employed as indicators because its serve as reliable proxies for technological progress in countries with very levels of technology advancement.
To analyze the relationship between digital financial inclusion, economic growth, and environmental sustainability, this study employs Feasible Generalized Least Square (FGLS) estimation techniques.
This method will be used in situation whereas violations in autocorrelation and heteroscedasticity (Le.
Chuc, and Taghizadeh-Hesary 2.
The analysis is based on data from 10 ASEAN member countries spanning the period from 2013 to 2023, so then the total observation from this sample is 154 observations.
Initial observations assumes that the growth of digital financial services is associated with a decrease in carbon emissions, reinforcing the theory that digital innovations can promote sustainability both economically and environmentally.
First finding in the impact of digital financial inclusion is inconsistent with earlier work by Zhang.
Cheung, and Qu .
and Khan et al.
, while the second finding seems also to be not in accordance with the research conduct by Zhang.
Mohsin, and Taghizadeh-Hesary .
and J.
Wang et al.
because there is positive relation between digital financial inclusion and carbon productions.
This research enriches the academic literature regarding sustainable development and digital Furthermore, the results provide crucial policy recommendations that could assist ASEAN nations in harmonizing their financial objectives with environmental aspirations, in accordance with international agreements such as the COP Paris Agreement.
This paper is organized as follows: Section 1 introduces the research background, motivation, and objectives.
Section 2 provides a comprehensive review of the literature on digital financial inclusion, economic growth, and environmental sustainability, along with relevant theoretical frameworks.
Section 3 outlines the empirical model, variables, and dataset used in the analysis.
Section 4 presents the findings of the study, including results from the endogeneity tests and the linear regression analysis conducted using FGLS Finally.
Section 5 concludes the paper with a discussion of the policy implications, limitations of the study, and suggestions for future research.
Literature Review The Determinants of Economic Growth Economic growth has been a key issue in economics until this digital era because of its strong link to human well-being and social advancement.
The Classical Theory, the Journal of Finance and Islamic Banking - Vol.
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Nukman Taufik et al.
Neoclassical Theory, the Endogenous Growth Theory, and the Modern Economic Growth Theory are few of the economic growth theories.
The Environmental Kuznets Curve (EKC) is foundation framework of this research, this theory suggested that initially environmental damage increases along with economic growth, but with time, it declines as income per capita increases, suggesting increased environmental consciousness and technical progress.
The decoupling of economic progress from environmental damage has been widely studied using this framework.
In accordance with (Kien et al.
Maria.
Urata, and Intal Jr 2.
previous research, the discussion about the significance of financial access in promoting economic sustainability is relevant with the issue of economic decoupling.
Through the adoption of technology in banking industry, it will accelerate the economic progress while reduce environment damage.
However, there is limited exploration of how digital financial inclusion interacts with the EKC model to influence carbon emissions, especially in developing economies like those in the ASEAN region.
The Association of Southeast Asian Nations (ASEAN), established in 1967, includes several countries: Indonesia.
Malaysia.
Singapore.
Thailand, the Philippines.
Brunei.
Vietnam.
Laos.
Myanmar.
Cambodia, and Timor-Leste.
This organization aims to encourage collaboration in economic, political, social, and cultural aspects to build a stable and thriving Southeast Asian community.
Over the past decade.
ASEAN has attracted significant global attention due to its remarkable economic growth.
Factors such as market opportunities, increased interconnection within the ASEAN Economic Community (AEC), urban growth, rising populations, and foreign direct investment (FDI) have been instrumental in driving this success (Kien et al.
Maria et al.
According to the (ASEAN 2.
, countries like Indonesia.
Vietnam, and Philippines recorded robust average annual growth rates of over 5% pre-pandemic.
Thailand and Malaysia, on the other hand, experienced more modest growth figures.
Even though ASEAN consists of many developing nations, financial inclusion has played a crucial role in boosting economic growth by allowing more individuals to participate in the economy and gain from technological progress.
The advancements in the financial sector and fluctuations in oil prices have favourably influenced the long-term economy of ASEAN, as noted by Hidthiir et al.
As per S&P Global.
ASEAN is anticipated to remain among the fastest-growing areas globally for the following decade.
The GDP is expected to rise from 1.
3 trillion USD in 2022 to 4.
1 trillion USD by 2035.
Environmental Sustainability in ASEAN The levels of environmental sustainability differ greatly among countries, shaped by factors like economic progress, governance, and environmental regulations (Sarkar et al.
Nevertheless, carbon emissions are a common and pressing issue, being the main contributor to climate change.
This situation adversely affects air quality, the wellbeing of ecosystems, and the ability of a country to reach sustainable environmental goals (Morelli.
In accordance with COP 2021 Paris Agreement, which underscores the necessity for the financial services sector to play an active role in promoting sustainable economic development with a target to reach net-zero emissions by 2060.
ASEAN has also initiated its Journal of Finance and Islamic Banking - Vol.
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Analyzing the Nexus Green Economy project as part of the ASEAN Economic Community (AEC) Blueprint This initiative aims to cultivate a thriving ASEAN community that emphasizes environmental sustainability.
Mazzai .
notes that researchers are now making distinctions between economic growth and the carbon emissions associated with it.
This research aims to identify regions or countries that have successfully separated economic development from fossil fuel consumption and carbon (CO.
OurWorldinData.
org shows that developed nations, such as the United Kingdom and the United States, have been successful in decoupling their economic growth from carbon emissions.
Decoupling is an idea derived from an inverted U-shaped of Kuznets Curve which tells that as income rises, pollution initially increases, but will ultimately decline over time, even as income continues to grow.
Zhu et al.
discovered that, in line with the Kuznets Curve theory, some ASEAN countries demonstrate a noticeable positive correlation between energy consumption and carbon emissions.
Furthermore.
Tay et al.
mentioned that digitalization in financial services will be able to support the sustainable development.
Financial Inclusion in ASEAN Originally, the concept of Financial Inclusion (FI) first emerged in the early 1990s.
After the 2008 global financial crisis, this term became widely recognized as it was seen to help during economic difficulties.
Financial inclusion is in line with the G20Aos agreement in 2009, which acknowledged that access to banking services can encourage economic growth and stability.
As reported by Khan et al.
, it is anticipated that financial service accessibility will boost economic conditions in developing nations, especially in Asia.
This improvement is evident in the decline of poverty, economic growth, fair income distribution, and stable financial systems.
Key aspects of financial inclusion involve payment services, savings, loans, and insurance (Demirguc-Kunt et al.
, 2.
The progress of financial inclusion, both traditional and digital, varies greatly among ASEAN nations, affected by their access to and utilization of formal financial services, which are shaped by socio-economic factors and financial regulations.
Among the ASEAN countries.
Malaysia.
Singapore.
Thailand, and Vietnam excel in their financial inclusion measures, as demonstrated by their high credit-to-GDP ratios (ASEAN, 2.
The World Bank's Global Findex 2021 report indicates that the overall financial inclusion rate in ASEAN is at 41%, with significant differences between countriesAisome having rates as low as 20% while others near 90%.
The 4th Industrial Revolution has urged the financial services sector to improve the use of digital technologies.
Liu et al.
point out the growth of Digital Financial Inclusion (DFI), a concept also acknowledged by Bank Indonesia .
Many ASEAN countries have created fairly advanced policy and regulatory frameworks for Digital Financial Services (DFS).
For example.
Indonesia and the Philippines have comprehensive policies and regulations, but the variety of digital products available is still limited (ASEAN 2.
Kouladoum.
Wirajing, and Nchofoung .
argue that digital financial services greatly enhance the financial sector, spurred by the increasing use of mobile phones, internet, and Adel .
also highlights that in Asia.
Africa, and Latin America, digital literacy.
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technology acceptance, and internet access have positively influenced financial inclusion.
gives an alert that policy maker is urged to prepare digital financial plans and policies to develop financial inclusion.
Subsequently, referring to Eco-Innovation Theory (Hojnik and Ruzzier 2.
suggested that innovations in technology can lead to sustainable economic growth by lowering environmental impact.
This theory can complement the idea of Kuznets Theory, which lead to the idea of digital financial services can have a dual role in this process.
First, it would help to increase economic growth by widen the access to financial products, even though it may initially demand for higher energy consumption and carbon printing.
Second part, as economy goes by, digitalization access can promote sustainable practices through green technologies while reducing fossil fuels.
Financial Inclusion to Economic Growth and Environmental Sustainability The role of financial inclusion is crucial for both boosting economic growth and ensuring environmental sustainability.
One of them is explored by Chibba .
, he pointed out that those lacking access to financial services encounter more significant financial Later investigations, conducted by Khan et al.
found a favourable link between financial inclusion and economic advancement, especially in developing nations where gaining access to financial services enhances economic activity and encourages involvement in the economy.
On the flip side, some research conducted by Menyelim et al.
and Nwisienyi and Obi .
, discovered an adverse relationship, particularly in African countries, attributed to differences in the data and models utilized.
The advancement of digital financial services, including e-money, fintech solutions, and mobile banking, has greatly enhanced financial inclusion by allowing a wider range of people to access financial services.
A study by Pramaswara .
revealed that digital financial inclusion has a positive impact on economic growth in Indonesia, and government programs such as cashless transactions have additionally promoted economic engagement.
The adoption of mobile money and tools like ATMs and debit cards is associated with boosted economic growth by speeding up the flow of money and enhancing access to formal financial frameworks (Hasan.
Abu Sayem, and Hossain 2024.
Ozturk and Ullah 2.
Specifically in Southeast Asia, the technological adoption hasnAot distributed evenly.
Previous studies in regions are still relied on old indicators, such as: ATMs and debit cards, to measurement digital financial services (Amaliah et al.
Compared to modern services, example: mobile money, e-wallet, etc, which may not be applicable in the landscape of ASEAN.
ATMs and debit cards could perform a standardized proxies across all countries.
In this paper, authors measure digital financial inclusion using two indicators: ATMs to represent the supply side and debit cards to represent the demand side.
Even though, this technology is conventional, but it can standardize the technology advancement between countries with vary economic scale.
Similarly, debit cards as the proxy of the demand side by offering a convenient and secure alternative to cash for everyday transactions (Scholnick et Regarding environmental sustainability, the improvement in financial inclusion also raises worries about higher energy use, leading to potential increases in carbon emissions and harm to the environment.
Nonetheless, the Environmental Kuznets Curve (EKC) theory Journal of Finance and Islamic Banking - Vol.
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Analyzing the Nexus implies that with rising income, awareness for the environment and investments in ecosystem conservation tend to grow.
This impact is further intensified when digital financial inclusion is linked with green economic initiatives, as similarly explained by Jahanger and Usman .
that investment allocated in green technologies promotes the Sustainable Development Goals as the representation of the matured economic in EKC.
On the other hand.
Fareed et al.
and Shahbaz et al.
found the financial industry's growth along with manufacturing and industrialization tends to increase carbon emissions and energy use through expanded company operations and it is depicted the first phase in EKC.
Zhang et al.
and X.
Wang et al.
suggested that nations exhibiting superior digital financial inclusion and adopting green technologies generally produce lower carbon emissions.
Moreover, the efficiencies achieved from digital advancements in financial institutions can help lessen carbon footprints by encouraging the use of renewable energy and decreasing CO2 output (Hafeez et al.
However, as variable measured in this research, few of previous research accounted for higher technology of digital financial inclusion, in this study eliminates the consideration technological maturity and consumer Referring to EKC and Eco-Innovation Theory, digital financial inclusion can play dual role in economic development agent while maintaining the environmental sustainability by minimizing carbon emissions.
The previous study (Tay.
Tai, and Tan 2022.
Wang et al.
mostly disclosed the impact of financial access from East Asia.
Middle East Asia, and Africa countries, while this research will elaborate on its applicability in the ASEAN region.
For this reason, this research formulates the following hypothesis:
H1: There is a positive influence between digital financial inclusion on economic growth.
H2: There is a negative influence between digital financial inclusion and carbon Research exploring how financial development, economic growth, and environmental sustainability are related (Ozturk & Ullah, 2022.
Wang et al.
, 2.
, have less concentrated in Southeast Asia.
ThatAos way, this study focuses on how relevant these issues to ASEAN This region characterized by diverse economic scale and technology development, presents an interesting situation to examine the effects of financial inclusion on economic progress and environmental impacts.
Methods In this research, we evaluate the impact of digital financial inclusion (DFI) on economic growth and carbon emissions within 11 ASEAN countries from 2010 to 2023.
Currently, digital financial inclusion serves as an essential driver of economic advancement (Van et al.
, 2.
Numerous empirical research findings have indicated that digital financial inclusion negatively affects carbon emissions, considering both direct and indirect pathways impacting environmental quality (Zaidi.
Hussain, and Uz Zaman 2.
Based on these observations, we create two main econometric models as mentioned by Ozturk and Ullah .
to investigate these relationships.
These models will be specified as follows:
Journal of Finance and Islamic Banking - Vol.
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Model for Economic Growth (GDP) yayaycEycnyc = yu0 yu1 yayayaycnyc yu2 yaycAyaycNycnyc yu3 yaycAyaycIycnyc yu4 yaycAyaycIycnyc yu5 yayayaycnyc yu6 yaycAyayaycnyc ycaycn yuAycnyc AA.
AA.
Model for Environment Sustainability (GHG) yayayaycnyc = yu0 yu1 yayayaycnyc yu2 yaycAyaycNycnyc yu3 yaycAyaycIycnyc yu4 yaycAyaycIycnyc yu5 yayayaycnyc yu6 yaycAyayaycnyc ycaycn yuAycnyc AA.
AA.
Where in these two models .
& .
GDP denotes the economic growth rate, while GHG denotes greenhouse gasses emission.
DFI or digital financial inclusion, the primary independent variable, is quantified using both supply-side indicators (ATM.
and demandside measures (Debit card.
The remaining ones are control variables which are Internet penetration (INET), industrialization rate (INDS), energy consumption (ENER), net foreign direct investment (FDI), and inflation (INFL), all of which have been extensively established to impact economic growth dynamics.
The error term (Ai.
accounts for unobserved variability and unpredictable shocks.
In here, we utilize panel data models that account for both time and cross-sectional aspects of the data.
Thus, this dataset is regarded as more comprehensive in comparison to separate time-series or cross-sectional data.
Assessing the specified models, the application of Feasible Generalized Least Squares (FGLS) is used because it gives several benefits.
This method is effectively utilized to tackle potential endogeneity concerns in both models.
Endogeneity occurs when the independent variable has a correlation with the error term, which results in biased estimations.
FGLS is more advisable if there are endogeneity or autocorrelation problems in the panel data, as described by Arellano & Bond .
The methods for collecting data are a crucial aspect of research, involving systematic and standardized approaches to gather the necessary sources of information for the study.
Data can be gathered retrieved from secondary sources provided by credible global data provided, including official sites, recognized institutions, or databases dedicated to delivering business-related information.
Table 1 shows the data description and sources.
Table 1 Description and data sources Variables GDP growth Greenhouse Gas emissions ATMs Debit card Internet user Industrialization Energy Consumption Foreign Direct Investment Inflation rate Descriptions GDP growth .
Greenhouse Gas emissions .
ATMs per 100,000 adults Debit card (% age 15 ) Individuals using the internet (% total Industry value added (% of GDP) Total Energy consumption .
FDI inflows (% of GDP) Consumer prices .
Source World bank
World bank
IMF
IMF
World bank
World bank
EIA
World bank World bank Following established procedures, we recognize possible drawbacks, such as missing data for some years or nations, that were handled via interpolation or exclusion.
To guarantee dependability, data was subjected to quality checks and validation procedures.
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Analyzing the Nexus Results and Discussion The descriptive statistical analysis provides an overview of the variables studied, such as the number of ATM, debit cards (DEBIT), economic growth (GDP), and carbon emissions (GHG).
As shown in Table 2, we can infer that GDP has a wide range of values, including a negative mean, showing that certain countries had economic contractions.
ATM
and DEBIT distributions are more constant, with ATM values suggesting a minor drop in infrastructure, which could correspond to the global trend of migrating to digital payments.
GHG .
has a slightly negative skew, indicating that emissions decreases are more The FDI .
oreign direct investmen.
and INET .
variables have substantial kurtosis, showing big peaks in investment and internet usage across the sample, potentially due to outlier countries in these areas.
Table 2 Statistic Descriptive of The Research Model Statistic Mean Median Maximum Minimum Std.
Dev.
Skewness Kurtosis JarqueBera
GDP
GHG
ATM
DEBIT
ENER
INFL
INET
INDS
FDI
The results of the multicollinearity test, as shown in Table 3, depicts that there are some significant relationships between the independent variables.
For example.
DEBIT and INET show a high correlation of 0.
864 and similarly with INET and DEBIT correlation coefficient .
, which could indicate potential multicollinearity that could affect the understanding of the model.
However, none of these correlations reach numbers close to 1, so there are no signs of very serious multicollinearity.
Nonetheless, attention should be paid to variables that have high correlations to avoid possible distortions in the regression results.
Table 3
Multicollinearity Test of all Variables GDP
GHG
ATM
DEBIT
ENER
INFL
INET
INDS
FDI
GDP
GHG
ATM
DEBIT
ENER
INFL
INET
INDS
FDI
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The Figure 2 visualizes the plotting of the data, which shows the trend of ATM and debit card within period across countries.
GDP has grown modestly and steadily over the years.
ATMs peaked rapidly around 2016 before stabilizing, signalling a shift away from traditional infrastructure as digital payment methods gained hold.
In contrast, the number of debit cards has constantly climbed, indicating a larger tendency toward digital financial This increase in digital payments correlates with a considerable spike in GHG .
arbon emission.
beginning around 2016, which parallels the increase in debit card usage, implying that the spread of digital financial services may be associated with increased energy consumption and environmental impact.
Despite moderate GDP growth, the rapid rise in GHG emissions underlines the possible environmental difficulties.
Figure 2 IndonesianAos Economic Growth and Emission Against ATM and Debit Card Prior to regression analysis, diagnostic tests for autocorrelation and heteroscedasticity were performed to evaluate the robustness of the econometric models.
The Breusch-Pagan test indicated that the GHG model had significant evidence of heteroscedasticity .
-value = 0.
, suggesting that the error variance was non-constant, whereas the GDP model did not show heteroscedasticity .
-value = 0.
Similarly, taken from the Wooldridge test to assess whether any autocorrelation revealed in each model.
The result shows no signs of autocorrelation in the GDP model .
-value = 0.
, while the GHG model exhibited strong evidence of autocorrelation .
-value = 0.
These findings highlight the need to address the concerns, particularly in the GHG model, which exhibits both heteroscedasticity and autocorrelation.
Statistically, estimation method using Feasible Generalized Least Squares (FGLS) is able to ensure both regression results unbiased and Table 4 Breusch-Pagan Test Result for Each Model Dependent Variable Model Probability Value (Prob.
Decision Result
GDP
0524 Reject H0 No Heteroscedasticity Detected GHG 0014 Accept H0 Heteroscedasticity Detected Journal of Finance and Islamic Banking - Vol.
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Analyzing the Nexus Table 5 Wooldrige Test Result for Each Model Dependent Variable Model Probability Value (Prob.
Decision Result
GDP
0524 Reject H0 No Heteroscedasticity Detected GHG 0014 Accept H0 Heteroscedasticity Detected Based on Table 6.
GDP model results indicate that digital financial inclusion variables.
ATM and debit card usage, have significant effects on economic growth (GDP).
Specifically, the number of debit card has a positive with coefficient 0.
025% and significant impact on GDP at the 5% level, while ATM use has a negative impact with coefficient 068% that is statistically significant at the 1% level.
This indicates that the use of ATMs may impede economic development, whereas the use of debit cards, which is a component of digital financial inclusion, fosters it.
However, when authors re-run the data up to 2019, it was found that ATM still made a positive contribution despite the insignificant results Further control variables demonstrate that energy consumption has a positive but moderate impact on GDP, while internet use has a negative impact on economic development at the 1% significance level.
Additionally.
Foreign Direct Investment (FDI) has a negative correlation with GDP, which is statistically significant at the 1% level.
Nevertheless, variables like inflation (INFL) and industrialization (INDS) have no statistically significant impact on economic growth.
The result implies that economic growth is significantly and favourably impacted by digital financial inclusion, particularly through the usage of debit cards.
Using FGLS methods for regression analysis, it discovered that increases in debit card penetration are positively correlated with GDP growth.
This confirms the findings of Ozturk and Ullah .
and Zhang et al.
, which highlight the fact that increased access to digital banking in developing nations improves transaction efficiency, accelerates the flow of money, and increases credit availability.
In contrast, the study deviates from the initial assumption and earlier studies that highlighted the essential role of ATMs in financial inclusion, particularly in emerging areas, by finding an unanticipated negative link between ATM density and economic growth (Nwisienyi and Obi, 2.
Research findings conducted by Fernandes.
Borges, and Caiado .
and Ahyar and Hakim .
claimed that digital financial inclusion along with conventional methods .
ike ATMs and debit card.
tends to experience stagnation when the new technology is offering more efficient user experience.
Going to deeper about the debit card use has a more favourable effect than ATM use, it might suggest that debit cards are a more adaptable and popular form of digital financial inclusion, users are still able to have flexible transaction and sequentially this process will contribute to economic growth.
On the other hand.
ATM usage may point to a reliance on obsolete financial infrastructure in certain areas, which may not offer the same degree of economic interaction as more modern digital payment methods.
Previous research (Kulindwa 2.
showed that energy consumption has a mild but positive effect on GDP, particularly in developing countries linked to industrialization and Journal of Finance and Islamic Banking - Vol.
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Nukman Taufik et al.
technology growth.
Unexpectedly, increased internet use can negatively impact economic development, suggesting issues like digital inequality or poor infrastructure as also mentioned by Maurseth .
This study also finds a negative link between Foreign Direct Investment (FDI) and GDP in the ASEAN region, hinting at inefficiencies in how FDI is utilized.
Lastly, the minor effects of inflation and industrialization on growth underscore the complexity of these factors in developing economies.
Table 6
Regression Result of GDP Model
ATM
DEBIT
ENER
INET
INDS
FDI
INFL
GDP
GHG
068***
112***
261***
028***
020***
736***
023***
071***
Standard errors in parentheses p < 0.
1, ** p < 0.
05, *** p < 0.
Refer to the result from GHG or carbon emissions model, it shows that debit cards .
oefficient = 0.
02% significant at 1%) and ATMs .
oefficient = 0.
028% significant at 1%) are both positively correlated with carbon emissions, suggesting that increased digital financial inclusion is associated with greater environmental impact.
This result indicates that although digital financial services increase access to formal financial systems, they may also result in greater carbon emissions.
Other variables in the models, energy consumption (ENER) and internet penetration (INET) negatively correlated with emissions, while industrialization (INDS) and foreign investment (FDI) showed positive associations.
Hypothetically, digital financial inclusion should improve environmental sustainability by lowering carbon emissions through increasing of efficiency in financial transactions (Renzhi and Baek 2.
However, as measured by the number of ATMs and debit cards, the regression findings indicate that digital financial inclusion has a substantial positive influence on carbon emissions in ASEAN zone.
One of the reasons is the increasing in access to digital financial services leads to greater economic activity and energy usage, which in turn raises emissions.
These findings are written by Fareed et al.
and Shahbaz et al.
, who point out that growth in the financial sector tends to exacerbate manufacturing and industrialization, which are major contributors to carbon emissions.
Previous research (Bajwa et al.
also found that even though debit cards and ATMs Journal of Finance and Islamic Banking - Vol.
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Analyzing the Nexus could support economic growth in ASEAN, but its increase carbon emissions due to energy Furthermore, cards cause more emissions than ATMs because they have more transactions and higher energy-use devices as written in Smartgreenpost.
Debit cards contribute to emissions from standby energy and manufacturing, while ATMs require more energy for cooling and cash transport.
Although both promote financial inclusion, debit cards have a larger impact on carbon emissions.
Regarding the control variables, this study also suggests that more energy and internet access may lead to lower carbon emissions, it means that ASEAN is already started to have better technology and cleaner energy (IRENA and ACE 2.
In contrast, industrialization and foreign direct investment are associated with higher emissions and it becomes main challenge happened across developing countries.
This is due to increased production demands and the need for stronger environmental regulations to mitigate environmental harm from industrial growth.
Overall, the results show that while digital financial inclusion can support economic growth .
ccept H.
However, in Southeast Asia, it still poses an environmental problem through increased carbon emissions .
eject H .
Referring to the Kuznets Curve, it might conclude that ASEAN is still in developing phase meaning with the current economic level has not been able to raise awareness of environmental sustainability.
Conclusion Using FGLS method, this study emphasizes the vital importance of including digital finance in supporting economic development and tackling environmental sustainability issues in ASEAN nations.
It demonstrated how developments in financial technology, like debit cards and ATMs, have enhanced access to financial services.
The findings show that while digital financial inclusion can support economic growth.
Through debit card usage, it performs a positive effect on economic growth, indicating that increased access to digital banking can drive economic activities and open doors for individuals and small businesses.
Conversely, the correlation between ATMs and GDP was surprisingly negative, suggesting a transition away from conventional ATM systems towards more advanced digital payment Regarding environmental sustainability, the results differed from the initial The study finds that in Southeast Asia are still poses an environmental problem through increased carbon emissions.
Both debit cards and ATMs showed a positive correlation with carbon emissions, suggesting that the growth of digital financial services could lead to higher energy consumption and increased demand for energy-heavy products.
Referring to the Kuznets Curve, the economic decoupling will be formed where the country's awareness of environmental sustainability will begin to increase as the country progresses, however ASEAN has not yet progressed to that stage.
The government and ASEAN organization need to prepare this according to the agreement of the world countries in the COP.
The results of this study lead to suggestions for future research to improve the discourse and increase the academic and practical value.
Based on the findings, authors are recommended that ASEAN integrate green financial into the design of criteria and Journal of Finance and Islamic Banking - Vol.
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Nukman Taufik et al.
implementation of digital financial services.
It can be achieved by incentivizing the adoption of eco-friendly technologies within financial transactions and encouraging the development of sustainable fintech innovations.
For further support, the establishment of a regional framework for green fintech development within ASEAN will be favourable.
Such a framework could foster collaboration among member to harmonize regulations and promote investments in sustainable financial technologies.
By prioritizing support for startups and financial institutions that align their digital offerings with sustainability objectives, this initiative is able not only drive economic growth but also contribute to environmental Ultimately, this approach has the potential to position ASEAN as a leader in sustainable fintech innovation while addressing the dual challenges of fostering economic development and mitigating environmental damage.
Reference