Financial inclusion and multidimensional poverty in Ecuador: A spatial approach

Abstract

In recent years, studies on poverty and inequality have focused on financial inclusion as a mechanism to improve people's living conditions. This paper studies the impact of financial inclusion on multidimensional poverty in the provinces of Ecuador during the period 2015–2018. A synthetic index of financial inclusion was developed, using the principal components analysis methodology in two stages. Additionally, using SARAR-type spatial panel data models, space is added as an explanatory factor to identify the existence of spatial effects among the Ecuadoŕs provinces, such as dependency and heterogeneity. The results indicate that financial inclusion has a positive and significant effect on poverty alleviation. This study also shows the spatial heterogeneity of multidimensional poverty and financial inclusion, and can support provincial-level planning to tackle territorial inequalities.