Author : Shan Kurincheedaran
Publisher :
Page : 16 pages
File Size : 50,17 MB
Release : 2020
Category :
ISBN :
Promoting financial inclusion is considered as primary strategy in poverty alleviation efforts globally. However, the effectiveness of financial inclusion in achieving poverty free world is fairly inconclusive. This study examines the impact of financial inclusion on poverty in low and lower-middle income countries by employing multivariate OLS and the Ordered Probit Model. The estimation under multivariate OLS model confirms that the improvement in financial inclusion reduces poverty even after controlling for physical and human capital. The results are robust and statistically significant. It reveals that the Financial Inclusion Index (FII) has greater impact on poverty than Adults Account Holding Ratio (ADACC) indicating to policy makers that improving account penetration alone has little impact on poverty reduction. Thus a mixed approach is required for an effective poverty alleviation intervention. In addition, the positive and significant relationship between primary education and poverty signals that the failure of attending primary education at appropriate age induces poverty.The ordered probit model takes into account of greater discrepancies in poverty among low and lower-middle income countries when estimating the impact of financial inclusion on poverty. This model estimates the likelihood of a country being exposed to different scale of poverty given the level of financial inclusion. While the sign and the significance of coefficient show that the financial inclusion lessens poverty the marginal effects indicate that the impact of financial inclusion varies based on the scale of poverty. Accordingly, financial inclusion is most likely to reduce poverty significantly in countries where poverty is very low and further increases poverty in countries where poverty is very high. This finding will help policy makers to reassess their poverty alleviation strategies for countries exposed to very high poverty.