Financial Deepening, Financial Inclusion, and Agricultural Investment: Evidence from International Panel Data

We investigate the impact of financial deepening and financial inclusion on agricultural investment across 68 countries from 2001 to 2020. We find that both financial deepening and financial inclusion positively and significantly influence agricultural investment. Financial deepening plays a more significant role in countries with greater banking sector development, whereas financial inclusion is more impactful in those with lower banking development, underscoring its importance in overcoming financial access constraints. Regionally, financial deepening shows a consistent effect across countries in Asia and the Pacific, while the role of financial inclusion is more significant in the Western Hemisphere, and in the Middle East and Central Asia. The effects of both financial deepening and financial inclusion are persistent for at least 2 years, suggesting that policies promoting financial access should be prioritized to sustain long-term agricultural investment. Our findings highlight the need for tailored financial policies that complement financial inclusion with financial deepening to ensure sustained agricultural investment. Our study contributes to the existing literature by providing novel cross-country evidence on the differentiated yet complementary roles of financial deepening and financial inclusion in fostering agricultural investment, thereby offering novel insights for policymakers aiming to achieve sustainable development.