Digitalization of finance and its socio-economic impact in post-soviet countries: An econometric analysis

Abstract

This study investigates the impact of financial digitalization and demographic factors on population welfare in post-Soviet countries. Using panel data from eight former Soviet republics (2011–2021), we develop an econometric model to assess how digital financial inclusion (proxied by account ownership), population growth, and urbanization influence the income share of the poorest 20%. A fixed-effects regression with robust standard errors is employed to control for country-specific heterogeneity. The results indicate that higher GDP per capita is significantly associated with a larger income share for the bottom quintile, supporting the notion of pro-poor growth. In contrast, demographic variables such as urbanization and population growth do not show statistically significant direct effects, suggesting their influence may be more indirect or long-term. Surprisingly, digital financial inclusion alone does not lead to measurable welfare improvements for the poorest; the coefficient on account ownership is statistically insignificant and slightly negative. Country-level fixed effects reveal substantial heterogeneity, highlighting the role of institutional and historical contexts. Overall, the findings suggest that while digital finance holds potential, it is not sufficient by itself to enhance inclusive welfare.