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Effect of Financial Inclusion on Poverty and Vulnerability to Poverty: Evidence Using a Multidimensional Measure of Financial Inclusion

Social indicators research, 2020-06, Vol.149 (2), p.613-639 [Peer Reviewed Journal]

Springer Nature B.V. 2020 ;Springer Nature B.V. 2020. ;ISSN: 0303-8300 ;EISSN: 1573-0921 ;DOI: 10.1007/s11205-019-02263-0

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  • Title:
    Effect of Financial Inclusion on Poverty and Vulnerability to Poverty: Evidence Using a Multidimensional Measure of Financial Inclusion
  • Author: Koomson, Isaac ; Villano, Renato A. ; Hadley, David
  • Subjects: Correspondence analysis ; Developing countries ; Female headed households ; Financial inclusion ; Financial services ; Households ; Human Geography ; LDCs ; Low income groups ; Microeconomics ; Money ; Original Research ; Poverty ; Private sector ; Public Health ; Quality of Life Research ; Rural communities ; Rural poverty ; Social Sciences ; Sociology ; Standard of living ; Urban areas ; Urban poverty ; Vulnerability
  • Is Part Of: Social indicators research, 2020-06, Vol.149 (2), p.613-639
  • Description: This study examines the effect of financial inclusion on poverty and vulnerability to poverty of Ghanaian households. Using data extracted from the seventh round of the Ghana Living Standards Survey in 2016/17, a multiple correspondence analysis is employed to generate a financial inclusion index, and three-stage feasible least squares is used to estimate households’ vulnerability to poverty. Endogeneity associated with financial inclusion is resolved using distance to the nearest bank as an instrument in an instrumental variables probit technique. Results showed that while 23.4% of Ghanaians are considered poor, about 51% are vulnerable to poverty. We found that an increase in financial inclusion has two effects on household poverty. First, it is associated with a decline in a household’s likelihood of being poor by 27%. Second, it prevents a household’s exposure to future poverty by 28%. Female-headed households have a greater chance of experiencing a larger reduction in poverty and vulnerability to poverty through enhanced financial inclusion than do male-headed households. Furthermore, financial inclusion reduces poverty and vulnerability to poverty more in rural than in urban areas. Governments are encouraged to design or enhance policies that provide an enabling environment for the private sector to innovate and expand financial services to more distant places. Government investment in, and regulation of, the mobile money industry will be a necessary step to enhancing financial inclusion in developing countries.
  • Publisher: Dordrecht: Springer Netherlands
  • Language: English
  • Identifier: ISSN: 0303-8300
    EISSN: 1573-0921
    DOI: 10.1007/s11205-019-02263-0
  • Source: ProQuest One Psychology
    ProQuest Central
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