Abstract
This study aimed to estimate the long-run impact of financial inclusion along with a set of control variables on the poverty in Jordan during the period spans from 1980 through 2018. The per capita income growth rate was used as an indicator of poverty due to the lack of annual data on poverty indices. The study used the Autoregressive Distributed Lag (ARDL) Model to test for cointegration. Also, both Fully Modified OLS (FMOLS) and Dynamic OLS (DOLS) are used to estimate the long-run model parameters. The ADF (Augmented Dickey-Fuller) results indicate that the variables integrated of order one I(1) or integrated of order zero I(0) but none is I(2). The diagnostic statistical tests necessary to ensure the model’s adequacy and validity indicate that the model is free from statistical problems, and the estimation results are reliable. The bounds test to cointegration provide evidence on the existence of long-run equilibrium relationship among variables, and hence, the variables are cointegrated. The empirical results revealed a positive effect of loans and demand deposits on per capita income, which reflects a reduction in poverty. While the number of bank branches has a negative impact on the per capita income, and hence, increasing poverty. Accordingly, the study recommended improving financial and banking systems to facilitate obtaining loans, increase the number of branches to improve individuals' access to financial services, and raising the interest rate on deposits to encourage investors and capital owners and companies to save in banks.
Highlights
At the end of the twentieth century, financial and banking services assisted tremendous expansion and development; this is a result of technical progress, especially in the field of the Internet for banking services, which helped to speed up its spread
The positive effect of loans is shown on the level of per capita income, so the increase in loans by 1%, will increase the per capita income PCI by (0.331603%) and since increasing the per capita income expresses a decrease in the poverty rate, any increase of the loans size to individuals leads to a reduction in the poverty rate and improve their livelihoods as they are considered as financing small projects sources
The effect of bank branches numbers was negative, the increases of BB by 1% will reduce the PCI by -0.91487%, Subsequently the poverty rate will reduce by the same percentage
Summary
At the end of the twentieth century, financial and banking services assisted tremendous expansion and development; this is a result of technical progress, especially in the field of the Internet (the World Wide Web) for banking services, which helped to speed up its spread These technologies have contributed to the innovation of financial instruments that helped all excluded groups of society in general, the poor people, women and youth in particular in accessing these financial instruments, which provide them with a sustainable standard of living [1]. The economic theories indicate that access to financial services allows the poor to improve investment and education, in addition to being a means that may lead to reduce poverty by helping the poor to diversify their sources of income through self-employment. The study employed the Autoregressive Distribution Lag Approach (ARDL) methodology to estimate the model parameters
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