Nexus between Financial Inclusion and Poverty: Does the Country's Education matter? Evidence from Lower-Middle-Income Countries

Authors

  • Amna Tariq National College of Business Administration & Economics, Lahore, Pakistan Author
  • Hafiz Muhammad Awais Raza National College of Business Administration & Economics, Lahore, Pakistan Author

DOI:

https://doi.org/10.61506/

Keywords:

Financial Inclusion, Poverty Reduction, Education Attainment, Lower-Middle-Income Countries

Abstract

There are special relations between financial inclusion and social inclusion with the latter being one of the best addressed when people have access to financial services. This paper explores effects of financial access on poverty, while incorporating moderation effects by years of schooling. Therefore, this study utilizes unbalanced panel data of 17 lower-middle-income countries itself and both the above mentioned static and dynamic panel model to conduct a strict panel data analyse. The analysis of data, employing the Composite Financial Inclusion Index (CFII) as an instrument to assess financial inclusion, shows that the level of financial inclusion and poverty in these countries are negatively related and sharply influenced. Also, the study discovers that there is a positive correlation between the financial inclusion, and Poverty reduction after controlling the effects of education attainment. They provide useful recommendations for policymakers, institutions dealing with money, and governments. First, financial services must be brought nearer to the poor populations which can reduce poverty level in the society. Second, a subsequent improvement of the education level is required to achieve the best results for financial inclusion on poverty reduction.

References

Adeel, A., Ali, A., & Chaudhary, A. R. (2021). Financial inclusion, education, and income nexus in Pakistan. Journal of Asian Finance, Economics, and Business, 8(4), 185–194.

Adeoye, D. O. (2016). Challenges of urban housing quality: Insights and experiences of Akure, Nigeria. Procedia-Social and Behavioral Sciences, 216, 260-268.

Ali, A. (2015). The impact of macroeconomic instability on social progress: an empirical analysis of Pakistan. (Doctoral dissertation, National College of Business Administration & Economics Lahore).

Ali, A. (2018). Issue of Income Inequality Under the Perceptive of Macroeconomic Instability: An Empirical Analysis of Pakistan. Pakistan Economic and Social Review, 56(1), 121-155.

Ali, A. and Bibi, C. (2017). Determinants of Social Progress and its Scenarios under the role of Macroeconomic Instability: Empirics from Pakistan. Pakistan Economic and Social Review 55 (2), 505-540.

Ali, A., & Audi, M. (2018). Macroeconomic Environment and Taxes Revenues in Pakistan: An Application of ARDL Approach. Bulletin of Business and Economics (BBE), 7(1), 30-39.

Ali, A., & Rehman, H. U. (2015). Macroeconomic instability and its impact on the gross domestic product: an empirical analysis of Pakistan. Pakistan Economic and Social Review, 285-316.

Ali, A., & Şenturk, I. (2019). Justifying the Impact of Economic Deprivation, Maternal Status and Health infrastructure on Under-Five Child Mortality in Pakistan: An Empirical Analysis. Bulletin of Business and Economics, 8(3), 140-154.

Allen, F., Demirgüç-Kunt, A., Klapper, L., & Martinez Peria, M. S. (2016). The foundations of financial inclusion: Understanding ownership and use of formal accounts. Journal of Financial Intermediation, 27, 1-30.

Almenberg, J., & Säve-Söderbergh, J. (2011). Financial literacy and retirement planning in Sweden. Journal of Pension Economics & Finance, 10(4), 585-598.

Anjani, Y. K. (2016). Financial inclusion and education: Empirical evidence from Nepal. Journal of Economics and Sustainable Development, 7(13), 28-35.

Audi, M & Ali, A. (2017). Socio-Economic Status and Life Expectancy in Lebanon: An Empirical Analysis. Archives of Business Research, 5(11), 159-170

Audi, M., Ali, A., & Roussel, Y. (2021). Aggregate and Disaggregate Natural Resources Agglomeration and Foreign Direct Investment in France. International Journal of Economics and Financial Issues, 11(1), 147-156.

Audi, M., Ali, A., & Roussel, Y. (2021). Measuring the Tax Buoyancy: Empirics from South Asian Association for Regional Cooperation (SAARC). Empirical Economics Letters, 20(12).

Beck, T., Demirguc-Kunt, A., & Levine, R. (2007). Finance, inequality, and poverty: Cross-country evidence. The World Bank.

Behrman, J. R., Gallardo-Garcia, J., Parker, S. W., Todd, P. E., & Vélez-Grajales, V. (2012). Are conditional cash transfers effective in urban areas? Evidence from Mexico. Education Economics, 20(3), 233-259.

Bhardwaj, G., Jain, S., & Tripathi, V. (2018). Financial inclusion: A key to equitable and inclusive economic growth in Asia. Journal of Emerging Market Finance, 17(3), 347–372.

Bhaskar, P. V. (2013). Financial inclusion in India–an assessment. Journal of Finance, 1(1), 22.

Burgess, R., & Pandey, P. (2005). Rural poverty in India: Incidence, issues, and policies. Economic and Political Weekly, 40(1), 17-23.

Camara, N. O., & Tuesta, D. (2014). An index of financial inclusion for developing countries: The case of Peru. Journal of Business Research, 67(3), 332-338.

Chao, L. H., & Collins, M. (2011). Education and financial inclusion in Asia. Asian Development Review, 28(2), 92–119.

Chaudhuri, S., Jalan, J., & Suryahadi, A. (2002). Assessing household vulnerability to poverty from cross-sectional data: A methodology and estimates from Indonesia.

Chauvet, L., & Jacolin, L. (2017). Financial inclusion and business growth: Evidence from emerging markets. Journal of Business Research, 81, 11-20.

Chibba, M. (2015). Financial inclusion, poverty reduction, and the millennium development goals. Journal of Sustainable Development, 8(3), 1–10.

Cole, S. A., & Shastry, G. K. (2009). Smart money: The effect of education, cognitive ability, and financial literacy on financial market participation (pp. 09-071). Boston, MA: Harvard Business School.

Demirgüç-Kunt, A., & Klapper, L. (2012). Measuring financial inclusion: Explaining variation in the use of financial services across and within countries. Brookings Papers on Economic Activity, 2012(1), 279-340.

Demirgüç-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). The Global Findex Database 2017: Measuring financial inclusion and the Fintech revolution. World Bank Policy Research Working Paper No. 8443.

Ellis, K., & Lemma, A., Juan-Pablo Rub. (2010). Investigating the impact of access to financial services on household investment.

Fadun, S. O. (2014). Financial inclusion, tool for poverty alleviation and income redistribution in developing countries: Evidences from Nigeria. Academic Research International, 5(3), 137.

Helms, B. (2006). Access for all: Building inclusive financial systems. World Bank Publications.

Hettige, S., & Kelegama, S. (2018). Financial inclusion and its determinants: Evidence from Sri Lanka. Journal of Asian Economics, 55, 42-58.

Honohan, P. (2007). Cross-country variation in household access to financial services. Journal of Banking & Finance, 31(1), 219–231.

Honohan, P. (2008). Cross-country measures of financial inclusion. Washington, DC: World Bank.

Hussain, S., Dahan, N. A., Ba-Alwib, F. M., & Ribata, N. (2018). Educational data mining and analysis of students’ academic performance using WEKA. Indonesian Journal of Electrical Engineering and Computer Science, 9(2), 447-459.

Imai, K. S., Arun, T., & Annim, S. K. (2010). Microfinance and household poverty reduction: New evidence from India. World Development, 38(12), 1760-1774.

Jabir, M. H., Masih, M., & Pilbeam, K. (2017). Financial inclusion and poverty reduction in developing countries: Evidence from Sub-Saharan Africa. Journal of International Financial Markets, Institutions & Money, 48, 217-233.

Jalilian, H., & Kirkpatrick, C. (2002). Financial development and poverty reduction in developing countries. International Journal of Finance & Economics, 7(2), 97-108.

Kim, D. (2016). Financial inclusion and education: A review. Journal of International Development, 28(5), 671–685.

Kim, S., Yu, J.-S., & Hassan, M. K. (2018). A dynamic panel analysis of financial inclusion and economic growth in OIC member countries. Journal of International Development, 30(7), 1162–1180.

Klapper, L., & Peria, M. S. M. (2016). Development aid and access to financial services. Journal of Financial Stability, 24, 29-43.

Kusuma, I. H., & Hasnah, R. (2019). The effect of financial literacy on financial inclusion: Evidence from Indonesia. Journal of Asian Finance, Economics, and Business, 6(4), 175-182.

Le, T. H., Le, H. C., & Taghizadeh-Hesary, F. (2020). Does financial inclusion impact CO2 emissions? Evidence from Asia. Finance Research Letters, 34, 101451.

Li, Y., & Lu, Y. (2016). The effect of education on financial inclusion: Evidence from China. Journal of Asian Economics, 46, 12–22.

Littel, M., Van den Berg, I., Luijten, M., van Rooij, A. J., Keemink, L., & Franken, I. H. (2012). Error processing and response inhibition in excessive computer game players: An event-related potential study. Addiction Biology, 17(5), 934-947.

Lusardi, A., & de Bassa Scheresberg, C. (2013). Financial literacy and high-cost borrowing in the United States (No. w18969). National Bureau of Economic Research.

Meyer, R. L., & Vu, M. T. (2016). Financial inclusion in Vietnam. In P. Rao & R. DasGupta (Eds.), Financial inclusion and the vulnerable segments of society: A comprehensive look at the empirical evidence (pp. 207-235).

Morduch, J. (2011). The financial inclusion challenge. In R. Chakrabarty & M. D'Souza (Eds.), The impact of financial inclusion in the development of rural and semi-urban areas (pp. 1–20).

Nopirin. (2018). Financial literacy, income, and education affect financial inclusion in Indonesia. International Journal of Business and Management Invention, 7(8), 19–26.

Omar, A., & Inaba, M. (2020). Financial inclusion in lower-middle-income countries: A new composite index. The Quarterly Review of Economics and Finance, 76, 70-80.

Park, C. Y., & Mercado Jr, R. (2018). Financial inclusion, poverty, and income inequality. The Singapore Economic Review, 63(01), 185–206.

Patwardhan, A. (2018). Peer-to-peer lending. In Handbook of Blockchain, Digital Finance, and Inclusion, Volume 1 (pp. 389–418). Academic Press.

Radiansyah, I., Rusdjan, C., & Priyadi, Y. (2016). Analisis ancaman phishing dalam layanan online banking. Journal of Innovation in Business and Economics, 7(1), 1-14.

Rojas-Suarez, L., & Amado, M. (2014). Financial inclusion: What is it worth? Inter-American Development Bank.

Sajid, A. & Ali, A. (2018). Inclusive Growth and Macroeconomic Situations in South Asia: An Empirical Analysis. Bulletin of Business and Economics (BBE), 7(3), 97-109.

Sarma, M. (2012). Index of financial inclusion. Economic and Political Weekly, 47(14), 50–58.

Sarma, M., & Pais, J. (2011). Financial inclusion and development: A cross-country analysis. Journal of International Development, 23(5), 613-628.

Sengupta, T., Mukhaerjee, S. K., & Banerjee, D. (2015). Impact of financial inclusion in the districts of West Bengal. The Management Accountant Journal, 50(10), 96-101.

Şentürk, İ., & Ali, A. (2021). Socioeconomic Determinants of Gender Specific Life Expectancy in Turkey: A Time Series Analysis. Sosyoekonomi, 29(49), 85-111.

Sharma, D. (2016). Nexus between financial inclusion and economic growth: Evidence from the emerging Indian economy. Journal of Financial Economic Policy, 8(1), 13–36.

Townsend, R. M., & Ueda, K. (2006). Financial deepening, inequality, and growth: A model-based quantitative evaluation. The Review of Economic Studies, 73(1), 251–293.

Turégano, D. J., & Herero, A. M. (2018). Inclusive financial systems and income inequality: A cross-country analysis. Journal of Economic Policy Reform, 21(3), 189-211.

Uddin, G. S., Shahbaz, M., Arouri, M., & Teulon, F. (2014). Financial development and poverty reduction nexus: A cointegration and causality analysis in Bangladesh. Economic Modelling, 36, 405-412.

Wardhono, A., Qori'Ah, C. G., & Indrawati, Y. (2016). The determinants of financial inclusion: Evidence from Indonesian districts. International Journal of Economic Perspectives, 10(4).

Zhang, H., & He, Q. (2018). Digital financial inclusion and household income: Evidence from China. Telematics and Informatics, 35(7), 2104–2114.

Downloads

Published

2024-10-20

Issue

Section

Articles

How to Cite

Tariq, A. ., & Raza, H. M. A. . (2024). Nexus between Financial Inclusion and Poverty: Does the Country’s Education matter? Evidence from Lower-Middle-Income Countries. Bulletin of Business and Economics (BBE), 13(3), 529-538. https://doi.org/10.61506/