Poverty, finance and institutions: evidence from OIC countries

Abstract

This chapter investigates poverty effects of finance and institutions using panel data for Organization of Islamic Conference (OIC) developing countries from 1984 to 2012. The results show that economic growth helps reduce poverty. The role of institutions for the poor of the Muslim world turns out to be more conducive than economic growth. In all of the cross-sectional and panel regressions, the index for institutions remains consistently negative and significant. The role of finance is also important, but it is not robust as it depends on the proxy of financial development. The monetization effect is stronger than the credit effect. The strong hold of law and order and stable governments are the important dimensions of institutional framework which help the poor, while corruption turns out to be one of the major causes of poverty in OIC countries. This study concludes that institutions are the basic prerequisite for helping the poor in OIC countries.