Abstract
Orientation: Access to and use of formal finance can be an epitome for poverty reduction in developing and transitional economies. Most of these economies experienced great growth in gross domestic product (GDP) compounded with exploding inequality, including racial wealth gaps, increasing starvation, exorbitant health and housing costs. Research purpose: The aim of this study was to examine the relationship between financial intermediation and poverty within the context of financial dimensions of financial access, financial efficiency and financial stability. Motivation for the study: Previous literature focuses mainly on the role of financial development in poverty reduction, with a dearth of literature on the other financial dimensions of financial access, financial efficiency and financial stability in reducing poverty. Research approach/design and method: A quantitative approach was used in this study through econometric analysis of the data. A panel data analysis was used for a panel of 35 developing countries, mainly in Africa. The panel heterogeneous estimation method of pooled mean group was employed in a panel autoregressive distributed lags setting for this article Main findings: Financial intermediation, including the other financial dimensions, reduces poverty. The effect of the financial dimensions depended on how poverty is measured. Practical/managerial implications: Policymakers and development agencies should take note of poverty measurement in addressing poverty challenges. Distorted understanding of poverty will result in distorted policies, which yield little or no results for the effective use of formal finance to reduce poverty. Contribution/value-add: Other financial dimensions of the formal financial sector can be considered for the use in poverty reduction strategies.
Highlights
High levels of poverty and inequality remain a challenge for most developing and transitional economies
By 2015, there was a shift in poverty concentration, with more than half of the global poverty concentrated in sub-Saharan Africa, whilst 12% reported in East Asia (World Bank 2018)
The study discusses the results4 of the cointegration and the error correction between the poverty proxies and the financial dimensions, namely, financial intermediation, financial efficiency, financial access and financial stability
Summary
High levels of poverty and inequality remain a challenge for most developing and transitional economies. In Africa, the 2030 agenda seeks to reduce poverty and inequality (Hagen-Zanker, Mosler Vidal & Sturge 2017). According to Cruz et al (2015), the past few decades have realised shifts in the composition of poverty in the developing and transitional economies. For the past few decades, 95% of the global poverty was concentrated in East Asia and Pacific, South Asia and sub-Saharan Africa (Cruz et al 2015). In the 1990s, 50% of the global poverty was reported in East Asia, with 15% in sub-Saharan Africa (World Bank 2015). By 2015, there was a shift in poverty concentration, with more than half of the global poverty concentrated in sub-Saharan Africa, whilst 12% reported in East Asia (World Bank 2018)
Sign-in/Register to view highlights & summary Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
