Impacts of Financial and Digital Inclusion on Poverty in South Asia and Sub-Saharan Africa

Abstract

The United Nations 2030 Agenda for Sustainable Development Goals calls for the elimination of many global challenges related to poverty. The first Sustainable Development Goal – the elimination of poverty – targets the challenges faced by the more than 700 million people who live on less than $1.90 per day. This study uses data from the 2017 InterMedia Financial Inclusion Insights surveys to examine the relationship between poverty and financial and digital inclusion across seven developing countries in South Asia and Sub-Saharan Africa. We find that increases in various measures of financial and digital inclusion are associated with significant reductions in poverty, including food insecurity. While the results are robust across the measures, some spatial heterogeneities are found for rural and urban populations. The most significant and consistent reductions in poverty are related to ownership and usage of traditional bank accounts. Access to and usage of non-bank financial institutions and mobile money accounts also significantly matters. Robustness checks for endogeneity and selection are conducted. The results provide strong evidence for the continued expansion of both traditional and non-traditional financial services and underscore the importance of digital financial services to support and sustain poverty reduction in developing countries.

Keywords: poverty, food insecurity, financial inclusion, digital finance, South Asia, Sub-Saharan Africa

JEL Classification: D14, D31, D91, G21, G23, J11, O17, O53, O55