FINANCIAL INCLUSION, POVERTY, AND INCOME INEQUALITY
Abstract
This paper extends the existing literature on financial inclusion by analyzing the factors affecting financial inclusion and assessing the impact of financial inclusion on poverty and income inequality in the world and Asia. We construct a new financial inclusion indicators to assess various macroeconomic and country-specific factors affecting the degree of financial inclusion for 176 economies, including 37 of which from developing Asia. We test the impact of financial inclusion, along with other control variables, on poverty and income inequality. We do so for full sample of countries and then for developing Asia sample to access which factors are relevant for full sample and for developing Asia specifically. The estimation results show that per capita income, rule of law, and demographic characteristics significantly affect financial inclusion for both world and Asia samples. However, primary education completion and literacy significantly increases financial inclusion only in the full sample, not for the Asian sample. The findings also indicate that financial inclusion is significantly correlated with lower poverty and income inequality levels for the full sample. For developing Asia, however, there appears to be no link between financial inclusion and income inequality.
References
- Allen, F, E Carletti, R Cull, J Qian, L Senbet and P Valenzuela (2013). Resolving the African financial development gap: Cross-country comparisons and a within-country study of Kenya. World Bank Policy Working Paper No. 6592, Washington, DC. Google Scholar
- Amidžić, G, A Massara and A Mialou (2014). Assessing countries’ financial inclusion standing — A new composite index. International Monetary Fund Working Paper No. 14/36, Washington, DC. Google Scholar
- Brune, L, X Giné, J Goldberg and D Yang (2011). Commitments to save: A field experiment in Rural Malawi. World Bank Policy Research Working Paper No. 5748, Washington, DC. Google Scholar
- [2005] Do rural banks matter? Evidence from the Indian Social Banking experiment. American Economic Review, 95 (3), 780–795. Crossref, Web of Science, Google Scholar
- [2007] Cross-country variation in household access to financial services. World Bank Access to Finance,
Washington, DC ,March 15–16, 2007 , World Bank. Google Scholar - [2008] Cross-country variation in household access to financial services. Journal of Banking and Finance, 32, 2493–2500. Crossref, Web of Science, Google Scholar
- [1995] Geographies of financial exclusion: Financial abandonment in Britain and the United States. Transactions of the Institute of British Geographers New Series, 20, 312–341. Crossref, Web of Science, Google Scholar
- Rojas-Suarez, L (2010). Access to financial services in emerging powers: Facts, obstacles, and policy implications. OECD Global Development Background Papers. Google Scholar
- Sarel, M (1997). How macroeconomic factors affect income distribution: The cross-country evidence. International Monetary Fund Working Paper No. 97/152, Washington, DC. Google Scholar
- Sarma, M (2008). Index of financial inclusion. Indian Council for Research on International Economic Relations Working Paper No. 215. Google Scholar
- Sinclair, SP (2001). Financial Exclusion: An introductory survey. Report of Centre for Research in Socially Inclusive Services. Edinburgh: Heriot-Watt University. Google Scholar
-
World Bank [2014] Global Financial Development Report 2014: Financial Inclusion, Washington, DC, World Bank. Google Scholar
