Paradigm Shift Toward Just and Sustainable Welfare: How Financial Inclusion Shapes Inclusive Green Growth Under Digital Infrastructure

Abstract

This study aims to examine the influence of financial inclusion dimensions accessibility (ACC), availability (AVA), and usability (USE) on the Inclusive Green Growth Index (IGGI) across all provinces in Indonesia, and to assess the moderating role of Digital Infrastructure (DIF) in strengthening this relationship. The study uses panel data from all provinces in Indonesia for the period 2019-2024 and employs three analytical approaches: Fixed Effects Model (FEM), Panel Vector Error Correction Model (PVECM), and moderation analysis using DIF. The findings reveal that in the FEM, ACC and USE have a positive and significant effect on IGGI, while AVA has a negative significant effect. The dynamic analysis using PVECM indicates that in the short term, ACC negatively affects IGGI, AVA and USE positively affect IGGI, whereas in the long term, ACC remains negative, USE remains positive, and AVA is no longer significant. The moderation analysis shows that DIF does not significantly moderate the effects of ACC and USE, while AVA is negatively significant, indicating that digital infrastructure has not fully enhanced the role of financial inclusion in promoting inclusive green growth. These results imply that policy strategies should focus on expanding equitable access to financial services, enhancing financial and digital literacy, strengthening regulatory support, and tailoring digital infrastructure development to regional and demographic conditions to foster sustainable inclusive green growth. The study’s limitations include the use of quantitative DIF measures without assessing the quality of technology adoption. Future research is recommended to explore the impact of financial inclusion at the micro level, adopt more current indicators, and conduct analyses by demographic regions or cross-country comparisons to validate findings.