The Impact of Digital Financial Inclusion on Labour Force Participation in SAARC Countries: Evidence from the Global Findex 2025

Abstract

Digital financial inclusion (DFI) has become an important policy issue in South Asia, where labour market participation remains uneven across countries and population groups. This study examines the association between digital financial inclusion and labour force participation in selected SAARC countries, using individual-level data from the Global Findex 2025. The analysis focuses on Bangladesh, India, Nepal, Pakistan, and Sri Lanka, with a final sample of 7,000 individuals aged 15 years and above. Employment status is specified as a binary outcome, while DFI is measured through access to a digitally enabled account, a mobile money account, or an account at a financial institution. A binary logistic regression model is employed, controlling for age group, gender, education, wealth quintile, country, residence, internet access, and mobile phone ownership. The findings indicate that individuals with DFI have higher odds of being in the workforce than those without DFI (OR = 1.714, p < 0.001). Mobile phone ownership is also positively associated with workforce participation (OR = 2.219, p < 0.001), whereas internet access is not statistically significant. The results further show a substantial gender gap, with women having lower odds of participation than men (OR = 0.186, p < 0.001). Average marginal effects suggest that the predicted probability of being employed is 36.6% among individuals without DFI and 58.2% among those with DFI. The model demonstrates reasonable discriminatory capacity, with an AUC of 0.76. Country-level predicted probabilities indicate heterogeneity across the five countries, with India showing the highest predicted probability and Bangladesh the lowest. Overall, the study suggests that digital financial inclusion is associated with greater labour force participation in South Asia, while gender and country-level differences remain important considerations for inclusive labour market policy.