DETERMINANTS OF DIGITAL FINANCE IN DEVELOPING COUNTRIES: THE ROLE OF DIGITAL INCLUSION, INCOME, AND INTERNET PENETRATION

Abstract

This research explores the correlation between digital finance, digital inclusion, income levels, and internet access in twenty-five countries from 2010 to 2024. The study is driven by the growing importance of digital infrastructure in shaping financial inclusion and the need to understand its role relative to conventional socioeconomic indicators. Using a quantitative methodology, the study employs descriptive statistics, correlation analyses, and regression analyses, including robust and log-transformed models, to examine factors affecting financial infrastructure, measured by the number of Automated Teller Machines (ATMs). Descriptive statistics show significant cross-country differences in ATM deployment, secure internet servers, wealth levels, and connectivity rates. The correlation analysis shows minimal relationships with all indicators; digital inclusion is strongly correlated with income and internet penetration. The null hypothesis (H01) is rejected because regression findings consistently show that digital inclusion significantly improves digital finance. Conversely, the retention of H₂ and H₃ is supported by the lack of significant effects from income level and internet penetration. The models' poor explanatory power suggests that other contextual factors, such as mobile banking use, legal frameworks, and urbanization, may matter more. Overall, the results show that secure digital infrastructure is structurally important for increasing financial access, but also imply that connectivity and economic capacity are not enough motivators on their own. To achieve sustained financial inclusion, the report suggests incorporating fintech technologies and prioritizing institutional digital readiness.