Abstract
Understanding the channels through which financial inclusion affects poverty reduction remains a key policy issue in development debates. Considering that labour is the main asset of the poor, this paper investigates the effect of financial outreach on the number of workers living below the poverty line. It also analyses whether this effect may occur through increasing investment, remittances, private credit and the number of rich workers who can provide employment opportunities to the poorest. The study finds that improving financial outreach through additional bank branches reduces the number of poor workers, especially in developing countries hit by macroeconomic instability. In addition, this effect occurs mainly through credit expansion, while other channels substitute financial outreach in countries with a low level of financial development.
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