The Role of Fintech in Enhancing FDI: Analyzing Government Effectiveness, Financial Literacy, and Institutional Quality in a Global Context

Abstract

This study examines the relationship between government effectiveness, financial literacy, and foreign direct investment (FDI), with fintech as a mediator and institutional quality as a moderator. Using panel data from 217 countries (2001–2022) and advanced econometric techniques, the results show that a 1% improvement in government effectiveness increases FDI inflows by 0.75%, while a 1% rise in financial literacy enhances FDI by 0.62%. The findings also indicate that fintech adoption strengthens these effects by increasing financial accessibility and reducing transaction costs. Moreover, countries with higher institutional quality experience a 1.2% greater impact of fintech on FDI compared to those with weaker governance. However, economies with poor regulatory frameworks struggle to leverage fintech for attracting investments. These insights highlight the need for strong financial governance, improved literacy programs, and fintech-driven policies to create an investor-friendly economic environment. The study offers key implications for policymakers, financial institutions, and global investors.