Does Financial Structure Matter for Poverty? Evidence from Developing Countries

27 Pages Posted: 20 Apr 2016

See all articles by Kangni Kpodar

Kangni Kpodar

International Monetary Fund (IMF)

Raju Jan Singh

World Bank

Date Written: December 1, 2011

Abstract

Although there has been research looking at the relationship between the structure of the financial system and economic growth, much less work has dealt with the importance of bank-based versus market-based financial systems for poverty and income distribution. Empirical evidence has indicated that the structure of the financial system has little relevance for economic growth, suggesting that the same could be true for poverty since growth is an important driver in reducing poverty. Some theories, however, claim that, by reducing information and transaction costs, the development of bank-based financial systems could exert a particularly large impact on the poor. This paper looks at a sample of 47 developing economies from 1984 through 2008. The results suggest that when institutions are weak, bank-based financial systems are better at reducing poverty and, as institutions develop, market-based financial systems can turn out to be beneficial for the poor.

Keywords: Debt Markets, Banks & Banking Reform, Access to Finance, Economic Theory & Research, Emerging Markets

Suggested Citation

Kpodar, Kangni and Singh, Raju Jan, Does Financial Structure Matter for Poverty? Evidence from Developing Countries (December 1, 2011). World Bank Policy Research Working Paper No. 5915, Available at SSRN: https://ssrn.com/abstract=1972131

Kangni Kpodar (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Raju Jan Singh

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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