Does sustainable banking facilitate reducing the SDG-10 in weak rule of law setting?

Ashfaq Habib; Muhammad Asif Khan; Hossam Haddad; Nidal Mahmoud Al-Ramahi

doi:10.1016/j.heliyon.2024.e24128

Does sustainable banking facilitate reducing the SDG-10 in weak rule of law setting?

Heliyon. 2024 Jan 9;10(2):e24128. doi: 10.1016/j.heliyon.2024.e24128. eCollection 2024 Jan 30.

Authors

Ashfaq Habib¹, Muhammad Asif Khan², Hossam Haddad^{3

4}, Nidal Mahmoud Al-Ramahi⁵

Affiliations

¹ Department of Business Administration, Faculty of Management, Humanities & Social Sciences, University of Poonch Rawalakot, Pakistan.
² Department of Commerce, Faculty of Management Sciences, University of Kotli, Kotli AJK, 11100, Pakistan.
³ Business Faculty, Zarqa University, Zarqa, 11831, Jordan.
⁴ College of Business Administration, University of Business and Technology, Jeddah, Saudi Arabia.
⁵ Business Faculty - Accounting Department - Zarqa University, Jordan.

Abstract

Facilitating economic opportunities is a critical function of the financial sector, and this contributes significantly towards the attainment of Sustainable Development Goals 10 (SDG-10), which aims to reduce income inequality. This research examines the role of sustainable banking practices in reducing income inequality and achieving SDG-10 under weak rule of law settings. We employed a panel cluster regression model to examine the data collected from 890 banks across 49 nations over a nine-year period (2014-2022). Specifically, we opted to cluster the observations based on industry and year to produce unbiased standard error. The findings reveal that sustainable banking practices are more effective in reducing income inequality, especially in settings with weak rule of law. They also contribute to combating money laundering, which is a significant barrier to achieving SDG-10. The study highlights the importance of transparent and responsible financial transactions in promoting investment opportunities that contribute to sustainable development. Moreover, we find that sustainable banking can accelerate the impact of Fintech in reducing income inequality in weak rule of law settings. The use of Fintech in the financial industry can improve transparency, accountability, and fairness, which are essential for progress towards achieving SDG-10. These findings have significant implications for the expansion of sustainable banking practices in regions with weak institutional frameworks.

Keywords: FinTech; Money laundering; SDG-10; Sustainable banking.