Digital Payments vs. Microfinance: A Causal Comparison of Financial Inclusion in Emerging Economies

Investigating the comparative impact of digital payment systems and microfinance on financial inclusion and income inequality across 47 developing economies, using a multi-method framework including TWFE, staggered DiD, IV (2SLS), Double Machine Learning, and Causal Forest estimation. The study introduces two composite indices – the Digital Payment Intensity Index (DPII) and Microfinance Intensity Index (MII) – and provides a context-conditional analysis of their effects across institutional and economic environments. The findings highlight a structural complementarity between demand-side digital finance mechanisms and supply-side microfinance interventions, with implications for policy design in emerging economies.