Does Increasing Access to Financial Services Have Potential to Decrease Poverty and Income Inequality? A Panel Study of Developing Economies.

Abstract

Promoting financial inclusion is essential for fostering social inclusivity, especially in tackling poverty and income inequality by giving marginalizing groups opportunity. In 42 developing countries, this research aims to investigate the impacts of decreasing poverty and wealth inequality through financial inclusion, as well as its causes and conditional consequences. We create a novel financial inclusion index using an imbalanced annual panel dataset with time intervals of 2011, 2014, 2017, and 2021. The index is based on a comprehensive set of parameters linked to financial sector outreach. Our results show that the degree of financial inclusion in emerging nations is highly influenced by variables such as per capita real GDP, owning credit card, borrowing for education and and saving for old age at a financial institution. Additionally, our strong findings offer convincing proof that, to some extent, financial inclusion considerably reduces poverty rates and income inequality.