Vietnam’s digital financial inclusion and its impact on provincial and regional poverty reduction

Purpose This study aims to investigate the potential of digital inclusive finance (DIF) to contribute to poverty alleviation in Vietnam, with the aim of supporting the country’s pursuit of the United Nations’ Sustainable Development Goals, as well as the strategic objectives set forth by the Vietnamese Government and Communist Party. The study explores how increased access and usage of digital financial services can be leveraged to drive progress toward reducing poverty and fostering more inclusive, equitable development outcomes across the country. Design/methodology/approach This study uses a panel data set of 63 Vietnamese provinces from 2018 to 2022 to analyze DIF and its impact on poverty reduction. To enhance the provincial-level understanding of financial inclusion, the DIF Index (Khera et al., 2022) is adapted by incorporating the provincial competitiveness index (PCI) as a multiplier. Given the endogeneity issues encountered, this study applies the generalized method of moments (GMM) estimator to obtain consistent and unbiased estimates. In addition, the research involves descriptive statistical analysis, model estimation, selection and diagnostic testing to ensure the robustness and validity of the implemented model. Findings This study finds that DIF has a significant poverty-reducing effect across Vietnam’s provinces. By improving access to financial services and facilitating more efficient capital allocation, digital finance helps vulnerable households improve their living conditions. The results further show that higher levels of economic growth, urbanization, industrialization and education are associated with lower poverty, whereas income inequality and geographic distance from major urban centers worsen poverty outcomes. Regional heterogeneity is also evident: the poverty-reducing effect of DIF is significant in the North and South, but not in the Central region, suggesting the importance of tailored policy responses. Practical implications This study offers key insights for policymakers to develop targeted strategies that leverage DIF for poverty reduction. Addressing regional disparities, particularly in the Central region, requires expanding mobile banking, fintech adoption and digital literacy programs to enhance financial accessibility. Financial institutions and policymakers should prioritize underbanked areas, ensuring that digital financial services reach disadvantaged households. Strengthening public–private partnerships can facilitate inclusive financial policies, promoting economic mobility and equitable financial access. Ultimately, enhancing DIF infrastructure will contribute to sustainable poverty reduction across Vietnam’s diverse economic and geographic landscapes. Social implications The findings emphasize DIF’s role in reducing regional poverty in Vietnam, highlighting the need for targeted interventions. Policymakers should establish a comprehensive framework to assess digital finance accessibility and identify underserved areas. Collaboration between government agencies and financial institutions is essential to expand mobile banking, fintech adoption and digital payments for disadvantaged households. Leveraging big data analytics can optimize financial service delivery, ensuring inclusivity. Strengthening public–private partnerships will enhance the poverty-reducing impact of digital finance, fostering sustainable and equitable economic development across regions. Originality/value This study contributes to the existing literature by offering a comprehensive analysis of DIF and its impact on poverty reduction across Vietnamese provinces using GMM estimation to address endogeneity concerns. Unlike previous studies that focus on national-level financial inclusion, this research integrates regional heterogeneity, highlighting the varying effects of DIF across different economic and geographic contexts. By incorporating the PCI into the DIF measurement, this study provides a nuanced understanding of financial access at the provincial level, offering policy-relevant insights for targeted poverty reduction strategies.