Fostering the SDG 10 in Weak Institutional Environments: The role of Sustainable Banking

Abstract

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English Spanish The potential of finance to reduce inequalities – the goal of SDG 10 – through the facilitation of economic opportunity is well known. Nevertheless, institutional voids may undermine this potential to abate inequality. Sustainable banking can bridge these institutional failures. We provide empirical evidence drawn from a database of 46 developed and developing countries over the period 2010-2017. We find that sustainable banking reduces income inequality within countries with weak formal institutions. These findings contribute to the literature by providing novel insights into the sustainable banking-income inequality abatement nexus, and the crucial influence of institutional quality on this linkage.

The potential of finance to reduce inequalities – the goal of SDG 10 – through the facilitation of economic opportunity is well known. Nevertheless, institutional voids may undermine this potential to abate inequality. Sustainable banking can bridge these institutional failures. We provide empirical evidence drawn from a database of 46 developed and developing countries over the period 2010-2017. We find that sustainable banking reduces income inequality within countries with weak formal institutions. These findings contribute to the literature by providing novel insights into the sustainable banking-income inequality abatement nexus, and the crucial influence of institutional quality on this linkage.