The inclusive financial system helps all members of the economy, especially poor and unbanked people to achieve financial services easily, without any price constraints or barriers. This study aims to investigate the impacts of the shadow economy, economic growth, urbanization and inflation on financial inclusion in Turkey for the period of 1985-2015. First, The Augmented Dickey-Fuller (ADF) and Philips-Perron (PP) unit root tests are applied to each variable to check stationarity. Secondly, Johansen co-integration test was utilized to explore the long-term relationship among given variables and then vector error correction model (VECM) applied to determine the short and long-term coefficients. At last, Granger causality test used to check the causal relationship between financial inclusion and explanatory variables. Empirical results assert that shadow economy, economic growth, urbanization, inflation and financial inclusion are in a long-term relationship. Economic growth and urbanization have positive while shadow economy and inflation have a negative impact on financial inclusion. According to these results, various policy recommendations can be provided in order to achieve a higher level of financial inclusion. Macroeconomic variables should be observed closely by policymakers. The shadow economy is the most important factor which needs to be concentrated. Tax incentives, subsidies might decrease the level of the shadow economy in Turkey which in return can increase the level of financial inclusion. Moreover, most parts of poor and unbanked groups live in rural areas, so the government might motivate formal financial institutions which operate in rural areas to offer appropriate financial services and financial products at affordable costs. On the other hand, as many instances, economic growth is the solution for financial inclusion.
