Financial Inclusion, Poverty, and Income Inequality in Developing Asia
By Cyn‐Young Park, Rogelio V. Mercado. 2015
490 citations recorded by the source corpus.
Poverty and income inequality remain a stubborn challenge in Asia and the Pacific despite the region’s rapid economic expansion in previous decades, which lifted millions out of poverty. Financial inclusion is often considered as a critical element that makes growth inclusive as access to finance can enable economic agents to make longer-term consumption and investment decisions, participate in productive activities, and cope with unexpected short-term shocks. Understanding the link between financial inclusion, poverty, and income inequality at the country level will help policymakers design and implement programs that will broaden access to financial services, leading to reduction of poverty incidence and income equality. This paper extends the existing literature on financial inclusion by focusing on developing Asian economies. We construct our own financial inclusion indicator to assess various macroeconomic and country-specific factors affecting the degree of financial inclusion for 37 selected developing Asian economies. We also test the impact of financial inclusion, along with other control variables, on poverty and income inequality. Our results show that per capita income, rule of law, and demographic characteristics significantly affect financial inclusion in developing Asia. Furthermore, we find that financial inclusion significantly reduces poverty; and there is also evidence that it lowers income inequality. Our findings suggest that the provisions for young and old-age populations, e.g., retirement pensions; and stronger rule of law, including enforcement of financial contracts and financial regulatory oversight, will broaden financial inclusion, thereby contributing to poverty reduction and lower income inequality.
Subfields: Accounting, Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/83a87a504e860e4deede083e29bc478873b8f406
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Citations in the corpus
- Financial inclusion research around the world: A review (2020, background): “Also, Park and Mercado (2015) find that financial inclusion significantly reduced poverty levels and income inequality in developing Asia.”
- Financial Inclusion and Economic Growth: The Role of Governance in Selected MENA Countries (2021, background): “Similarly, Honohan (2008), Rojas-Suarez and Gonzales (2010), and Park and Mercado (2015) found a positive link between improvement in institutions and financial inclusion.”
- Industry 4.0 in Finance: The Impact of Artificial Intelligence (AI) on Digital Financial Inclusion (2020, unknown): “Some of the factors that exacerbated this was lack of data (Park and Mercado 2018).”
- Measuring financial inclusion: a composite FI index for the developing countries (2020, methodology): “Similar to Sarma (2008), Park and Mercado (2015, 2018) calculated the FI index by combining five factors: ATMs, bank branches, borrowers, depositors and domestics credit to GDP ratio.”
- Financial Inclusion and Economic GROWTH: An International Evidence (2019, methodology): “First, the proposed index has a characteristics of a calculation with ease, a satisfaction with mathematic properties, and a standardization for hypothesis testing (Sarma 2008, 2012; Park and Mercado, 2015).”
- Does financial inclusion reduce poverty and income inequality in developing countries? A panel data analysis (2020, methodology): “(2015), but differs significantly from Honohan (2007, 2008) and Park and Mercado (2015), who found little econometric evidence that financial inclusion lowers income inequality.”