Nexus between Financial Inclusion and Poverty: Does the Country's Education matter? Evidence from Lower-Middle-Income Countries

Abstract

There are special relations between financial inclusion and social inclusion with the latter being one of the best addressed when people have access to financial services. This paper explores effects of financial access on poverty, while incorporating moderation effects by years of schooling. Therefore, this study utilizes unbalanced panel data of 17 lower-middle-income countries itself and both the above mentioned static and dynamic panel model to conduct a strict panel data analyse. The analysis of data, employing the Composite Financial Inclusion Index (CFII) as an instrument to assess financial inclusion, shows that the level of financial inclusion and poverty in these countries are negatively related and sharply influenced. Also, the study discovers that there is a positive correlation between the financial inclusion, and Poverty reduction after controlling the effects of education attainment. They provide useful recommendations for policymakers, institutions dealing with money, and governments. First, financial services must be brought nearer to the poor populations which can reduce poverty level in the society. Second, a subsequent improvement of the education level is required to achieve the best results for financial inclusion on poverty reduction.