Causal association of entrepreneurship ecosystem and financial inclusion

Economic development fosters a favorable ecosystem for entrepreneurs. Economic development and entrepreneurship ecosystem have positive causality with each other. Subsequently, economic development is also a useful determinant of the entrepreneurship ecosystem and vice-versa. The entrepreneurship ecosystem cannot be nurtured without financial development. However, limited studies have observed the causal association between an entrepreneurship ecosystem and financial inclusion. As financial development has a vital contribution to increasing the entrepreneurship ecosystem, this study examines the cause-and-effect relationship between entrepreneurship ecosystem and financial inclusion across countries. The regression coefficients of selected independent variables are estimated through robust empirical models. For said investigation, the global financial inclusion index and global entrepreneurship ecosystem index score were used as proxy variables for financial inclusion and entrepreneurship ecosystem, respectively in regression analysis. The empirical findings revealed that financial inclusion can be improved with an increase in entrepreneurship ecosystem, economic development, ease of doing business, employers, foreign direct investment net inflow, use of internet facilities, and wage and salaried workers. In the same way, entrepreneurship ecosystem can also be nurtured with financial inclusion, economic development, trade openness, ease of doing business, total employers, use of internet facilities and wage and salaried workers increase. The empirical results also inferred that entrepreneurship ecosystem, gross domestic per capita, foreign direct investment net inflow, ease of doing business, employer's start-up procedures to register a business and wages and salaries are important indicators to expand financial inclusion. Further, the results claimed that entrepreneurship ecosystem and financial inclusion are complementary to each other.