proposed research title about poverty

Poverty Research Proposal

Introduction, poverty: statement of the problem, significance of the study, relevant literature review, methodology.

For a long time, poverty has been perceived to constitute lack or inadequacy of basic needs, including food, clothing, and shelter. The levels by which different societies achieve these three basic essentials vary, and this explains the differences in poverty levels among different societies. Today, America is described to have the highest level of poverty rate compared to other industrialized countries (Garcia, 2011).

To justify this, the recent and most current statistics from the Census Bureau shows that the level and rate of poverty in USA is increasing, with minority ethnic groups being the most disadvantaged (Dye, 2010).

In the past, numerous poverty reduction policies have been formulated and implemented, but their overall impact remains below expectations, as the main beneficiaries are the middle class in expense of the poor (Dye, 2010). Therefore, the situation calls for paradigm shift in policy formulation and implementation.

In the year 2010, poverty rate in USA stood at 15.1% up from 14.3% recorded in the previous year-2009 (USA Census Bureau, 2011). At the same time, it was noted that poverty rate for the last four years has been increasing at an estimated rate of 2.6%.

On overall, in 2010, estimates indicated that about 46.2 million Americans are poor and the rate of poverty increased was observed to affect almost all major ethnic groups in America: Whites, African American, Asians, Hispanic (USA Census Bureau, 2011).

Furthermore, the 2010 official statistics indicated the highest rate of poverty the country had experienced and recorded since 1993. Therefore, in order to address this issue of increasing poverty, there is need to conduct an action research that investigates public policy initiatives in USA with regard to poverty, and subsequently propose the most effective public policy that can be pursued successfully.

Poverty remains an issue that ought to be addressed in the American society as a way of achieving the American Dream. Social inclusion goals and objectives postulate that, the well-being of humankind is the essence of stability, peace, and societal development.

Therefore, addressing poverty is one way of achieving social inclusion goals. At the same time, there is need for an effective public policy that comprehensively addresses the issues of poverty in the country. Therefore, this study possesses the ability to create a sound body of knowledge that in turn can be used to create an effective public policy framework.

Poverty level in USA is increasing at gradual rate, and the overall impact of this to the society is huge (Garcia, 2011). Addressing poverty has assumed and utilized unilateral public policy models that in turn have led to inadequacy in tackling the issue of poverty.

For instance, many of the convectional poverty policies address education, employment, social security, health, economic growth, and tax (Anonymous, 2006). This has been done in separateness and the result has been construction, formulation, and implementation of skewed and weak poverty reduction models.

There is need to establish broad-based understanding of poverty and know that it interplays with other factors and elements simultaneously, hence any attempt to address poverty requires addressing the interplay of accompanying factors.

According to Corak (2005), in order to fight poverty, social and physical infrastructure and services can be funded and maintained effectively if the target groups are involved in designing, implementing, and monitoring them, as well as in ensuring accountability of the government officials responsible for such policies.

Primary and secondary research methods will be utilized, where primary data will be generated through actual field research techniques, while secondary data will be generated from works already done in the field. Furthermore, reliability and validity of information will be enhanced through use of both quantitative and qualitative techniques.

This will see the use of questionnaires, field interviews, poverty program surveys, and in-depth discussion. The aim of this will be to ensure that the public policy to be designed captures the aspect and essence of poverty and subsequent reduction strategies in broad perspective.

Poverty remains a social issue that requires clear strategies of addressing it. Efforts in the past have bore fruits, but given recent trends of increasing cases of poverty in the society, there is an urgent need to address poverty comprehensively. It is from this fact that it is recommended that addressing poverty in modern America require an action plan originating from an inclusive and integrated social equity policy strategy.

Anonymous. (2006). How can we solve the problem of poverty . Web.

Corak, M (2005). Equality of Opportunity and Inequality across the Generations: Challenges Ahead. Policy Options , 26(3), 78–83.

Dye, T.R. (2010). Understanding public policy (13th ed.). Longman: Pearson Prentice Hall.

Garcia, G. (2011). Mexican American and Immigrant Poverty in the United States . NY: Springer.

USA Census Bureau . (2011). ‘Poverty Highlights . USA Federal Press. Web.

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202 Poverty Essay Topics & Examples

Poverty is one of the most pressing global issues affecting millions of individuals. We want to share some intriguing poverty essay topics and research questions for you to choose the titles of your paper correctly. With the help of this collection, you can explore the intricate dimensions of poverty, its causes, consequences, and potential solutions. Have a look at our poverty topics to get a deeper understanding of poverty and its implications.

💸 TOP 10 Poverty Essay Topics

🏆 best poverty essay examples, 👍 catchy poverty research topics, 🧐 thought-provoking poverty topics, 🎓 interesting poverty essay topics, ❓ research questions about poverty.

• Poverty: Causes and Solutions to Problem
• Poverty as a Social Problem
• Homelessness and Poverty in Developed and Developing Countries
• The Eliminating Poverty Strategies
• Correlation Between Poverty and Juvenile Delinquency
• Poverty Effects on an Individual
• Degrading Consequences of Poverty in “The Pearl” by John Steinbeck
• Poverty Effects on Mental Health This paper examines the link between poverty and mental health, the literature findings on the topic, and proposes a potential solution.
• Global Poverty and Nursing Intervention It is evident that poor health and poverty are closely linked. Community nurses who are conversant with the dynamics of the health of the poor can run successful health promotion initiatives.
• Relationship Between Poverty and Crime The paper makes the case and discusses inequality rather than poverty being the prime reason for people committing crimes.
• Poverty and Theories of Its Causes Poverty in schools is a significant barrier to education that needs to be overcome to improve teaching and learning.
• Poverty from Functionalist and Rational Choice Perspectives Poverty is a persistent social phenomenon, which can be examined from both the functionalist and rational choice perspectives.
• Effects of Poverty on Education in the USA Colleges It is clear that poverty affects not only the living standards and lifestyle of people but also the college education in the United States of America.
• The Poverty as an Ethical Issue Looking at poverty as an ethical issue, we have to consider the fact that there are people who control resource distribution, which then leads to wealth or poverty in a community.
• Urbanization and Poverty in “Slumdog Millionaire” Film Boyle’s movie, “Slumdog Millionaire,” is one of many successful attempts to depict the conditions in which people who are below the poverty level live.
• The Orthodox and Alternative Poverty Explanations Comparison Poverty has over the years become a worldwide subject of concern for economies. This essay will explore two theories- the orthodox and the alternative theories to poverty.
• Effects of Divorce and Poverty in Families In the event of a divorce children are tremendously affected and in most cases attention is not given to them the way it should.
• Poverty from Christian Perspective Christians perceive poverty differently than people without faith, noting the necessity for integrated support to help those in need.
• How Does Poverty Affect Crime Rates? On the basis of this research question, the study could be organized and conducted to prove the following hypothesis – when poverty increases, crime rates increase as well.
• The Analysis of Henry George’s “Crime of Poverty” Reviewing Henry George’s Crime of Poverty, which was written in 1885, in its historical context can shed light on socio-political developments within the country.
• Empowerment and Poverty Reduction The objective of this essay will be to highlight the health issues caused by poverty and the strategies needed to change the situation of poor people through empowerment.
• Bullying in Poverty and Child Development Context The aim of the present paper is to investigate how Bullying, as a factor associated with poverty, affects child development.
• Poverty in Young and Middle Adulthood According to functionalism, poverty is a dysfunctional aspect of interrelated components, which is the result of improper structuring.
• Vicious Circle of Poverty In this essay, the author describes the problem of poverty, its causes and ways of optimizing the economy and increasing production efficiency.
• The Problem of Poverty in Art of Different Periods Artists have always been at the forefront of addressing social issues, by depicting them in their works and attempting to draw the attention of the public to sensitive topics.
• Diana George’s Changing the Face of Poverty Book Diana George’s book, Changing the Face of Poverty, begins with a summary of several Thanksgiving commercials and catalogs.
• Poverty and Homelessness in Jackson, Mississippi This paper will review the statistics and information about poverty and homelessness in Jackson, MS. The community of Black Americans is suffering from poverty and homelessness.
• Poverty in “On Dumpster Diving” by Lars Eighner Essay “On Dumpster Diving” by Lars Eighner evokes compassion and prompts individuals to think about social problems existing nowadays.
• Poverty in “Serving in Florida” and “Dumpster Diving” “Serving in Florida” by Barbara Ehrenreich describes the harsh reality of living in poverty while concentrating on the pragmatic dimension of the issue
• “What Is Poverty” by Dalrymple The purpose of this paper is to present Dalrymple point of view and analyze it by applying philosophical concepts.
• Poverty: Behavioral, Structural, Political Factors The research paper will primarily argue that poverty is a problem caused by a combination of behavioral, structural, and political systems.
• The Concept of Poverty This work is aimed at identifying the key aspects associated with poverty and its impact on the lives of people in different contexts.
• How Poverty Impacts on Life Chances, Experiences and Opportunities for Young People The paper specifically dwells on the social exclusion, class, and labeling theories to place youth poverty in its social context.
• Poverty in Ghana: Reasons and Solution Strategy The analysis provided in the paper revealed some internal and external factors that deter better economic and human development in Ghana.
• Global Poverty, Inequality, and Mass Migration Such global issues as poverty and inequality and mass migration are significant today since many people are involved in them.
• How Poverty Affects Early Education? A number of people live in poor conditions. According to the researchers of the Department of Education in the United States, poverty influences academic performance in an adverse way.
• Rutger Bregman’s Statement of Poverty The paper states that Bregman’s approach to poverty and the proposal of guaranteed regular income is more suitable for developing countries.
• Poverty Relation With Immigrants Poverty-related immigration is usually caused by population pressures; as the natural land becomes less productive due to the increased technology and industrial production.
• Utilitarianism: Poverty Reduction Through Charity This paper shows that poverty levels can be reduced if wealthy individuals donate a part of their earnings, using the main principles of the utilitarian theory.
• The City of Atlanta, Georgia: Poverty and Homelessness This project goal is to address several issues in the community of the City of Atlanta. Georgia. The primary concern is the high rate of poverty and homelessness in the city.
• Evaluating the “Expertness” of the Southern Law Poverty Center The Southern Law Poverty Center has garnered controversy for its list of so-called “hate groups” and how it spends its half-billion-dollar budget.
• Lessons Learned From the Poverty Simulation The main lesson learned from the poverty simulation is that poverty is far more serious than depicted in the media, which carelessly documents the numbers of poor people.
• The Ideal Society: Social Stratification and Poverty The paper argues social classes exist because of the variations in socioeconomic capacities in the world; however, an ideal society can eliminate them.
• Love and Poverty in My Papa’s Waltz by Theodore Roethke The present paper includes a brief analysis of the poem ‘My Papa’s Waltz’ with a focus on imagery and figurative language.
• Poverty: Causes and Reduction Measures Poverty is a global disaster and that a large percentage of the population has insufficient income or material possessions to satisfy their basic needs.
• Poverty: “$2.00 a Day” Book by Edin and Schaefer In their book “$2.00 a Day: Living on Almost Nothing in America,” Edin and Schaefer investigate problems that people who live in poverty face every day.
• Chronic Poverty and Disability in the UK The country exhibits absolute poverty and many other social issues associated with under-developed states. The issue is resolvable through policy changes.
• Poverty and Inequality: Income and Wealth Inequality The Stanford Center of Poverty and Inequality does an in-depth job of finding causes and capturing statistics on poverty and inequality.
• How Access to Clean Water Influences the Problem of Poverty Since people in some developing countries have insufficient water supply even now, they suffer from starvation, lack of hygiene, and water-associated diseases.
• Habitat for the Homeless: Poverty The paper states that Habitat for the Homeless comes to fulfill American values by ensuring that Americans can afford houses at a low price.
• Carl Hart’s Talk on Racism, Poverty, and Drugs In his TED Talk, Carl Hart, a professor of neuroscience at Columbia University who studies drug addiction, exposes a relationship between racism, poverty, and drugs.
• Global Poverty and Human Development Poverty rates across the globe continue to be a major issue that could impair the progress of humanity as a whole.
• Poverty and Homelessness in Canada Poverty and homelessness figure prominently in government policies and the aims of many social service organizations even in a country like Canada.
• Poverty in the “LaLee’s Kin” Documentary In this paper, the author will analyse poverty as a social problem in the Mississippi Delta. The issue will be analysed from the perspective of the documentary “LaLee’s Kin”.
• Immigrant Children and Poverty Immigrant child poverty poses considerable social predicaments, because it is related to several long lasting school and development linked difficulties.
• Human Trafficking and Poverty Discussion This paper synthesize information on human trafficking and poverty by providing an annotated bibliography of relevant sources.
• Racial Discrimination and Poverty Racial discrimination and poverty have resulted in health disparities and low living standards among African Americans in the United States.
• Poverty and Its Negative Impact on Society Poverty affects many people globally, experiencing poor living conditions, limited access to education, unemployment, poor infrastructure, malnutrition, and child labor.
• Should People Be Ashamed of Poverty? People on welfare should not feel ashamed because the definition of poverty does not necessarily place them in the category of the poor.
• Wealth and Poverty Sources in America This paper explains the causes and consequences of poverty in the United States, programs and systems to combat it, and government benefits to support families in distress.
• Global Poverty and Education Economic theories like liberalization, deregulation, and privatization were developed to address global poverty.
• Poverty, Faith, and Justice: ”Liberating God of Life” by Elizabeth Johnson “Liberating God of Life Context: Wretched Poverty” by Johnson constructs that the main goal of human beings is to combat structural violence toward the poor.
• Poverty and Mental Health Correlation The analysis of the articles provides a comprehensive understanding of the poverty and mental health correlation scale and its current state.
• World Poverty as a Global Social Problem Poverty and the key methods helping to reduce it attract the attention of numerous researchers in different areas of expertise.
• The Issue of Poverty in Savannah, Georgia The paper addresses a serious issue that still affects Savannah, Georgia, and it is poverty. This problem influences both individuals and society.
• Child’s Development and Education: Negative Effects of Poverty Some adverse effects of poverty on a child’s development and education are poor performance academically, stagnant physical development, and behavioral issues.
• Poverty, Politics, and Profit as US Policy Issue Poverty remains one of the most intractable problems to deal with, both in the international community and in the United States.
• Christ’s Relationships with Wealth and Poverty This paper attempts to examine Christ’s relationships with wealth, money and poverty and provide an analysis of these relationships.
• Poverty and Social Causation Hypothesis There are two identified approaches to poverty on cultural and individual levels as formulated by Turner and Lehning
• Poverty and Poor Health: Access to Healthcare Services Health disparities affecting ethnical and racial groups, as well as people with low income, operate through the social environments, access to healthcare services.
• Wealth, Poverty, and Systems of Economic Class By examining wealth, poverty, and economic classes from the perspective of social justice, the socioeconomic inequalities persistent in society will become clear.
• Attitudes to Poverty: Singer’s Arguments Singer argues against the observation by the rich than helping one poor person can repeat over and over again until the rich eventually becomes poor.
• The U.S. Education: Effect of Poverty Poverty effects on education would stretch to other aspects of life and this justifies that, poverty in United States not only affects social lifestyles but also college education.
• Poverty in New York City and Media Representation This paper will analyze recent news publications regarding the urban issue of poverty in NYC and determine how the city is represented in the media.
• Poverty: The Negative Effects on Children Poor children often do not have access to quality healthcare, so they are sicker and more likely to miss school. Poor children are less likely to have weather-appropriate clothes.
• The Issue of the Poverty in the USA The most sustainable technique for poverty elimination in the United States is ensuring equitable resource distribution, education, and healthcare access.
• Poverty and How This Problem Can Be Solved Poverty is one of the global social problems of our time, existing even in the countries of the first world despite the generally high standard of living of people.
• Poverty: An Interplay of Social and Economic Psychology The paper demonstrates an interplay of social and economic psychology to scrutinize the poverty that has given rise to a paycheck-to-paycheck nation.
• Refugees: Poverty, Hunger, Climate Change, and Violence Individuals struggling with poverty, hunger, climate change, and gender-based violence and persecution may consider fleeing to the United States.
• The Extent of Poverty in the United States The paper states that the issue of poverty in the USA is induced by a butterfly effect, starting with widespread discrimination and lack of support.
• Poverty in Puerto Rico and Eradication Measures Studying Puerto Rican poverty as a social problem is essential because it helps identify the causes, effects, and eradication measures in Puerto Rico and other nations.
• Human Trafficking and Poverty Issues in Modern Society The problem of human trafficking affects people all over the world, which defines the need for a comprehensive approach to this issue from the criminology perspective.
• Poverty and Homelessness Among African Americans Even though the U.S. is wealthy and prosperous by global measures, poverty has persisted in the area, with Blacks accounting for a larger share.
• Poverty: Resilience and Intersectionality Theories This paper assesses the impact of poverty on adult life, looking at risk and protective factors and the impact of power and oppression on the experience of poverty.
• Economic Inequality and Its Relationship to Poverty This research paper will discuss the problem of economic inequality and show how this concept relates to poverty.
• Discussion of Poverty and Social Trends The advances and consequent demands on society grounded on social class and trends profoundly influence poverty levels.
• Life of Humanity: Inequality, Poverty, and Tolerance The paper concerns the times in which humanity, and especially the American people, live, not forgetting about inequality, poverty, and tolerance.
• Poverty, Its Social Context, and Solutions Understanding past and present poverty statistics is essential for developing effective policies to reduce the rate of poverty at the national level.
• Poverty in the US: “Down and Out in Paris and London” by Orwell The essay compares the era of George Orwell to the United States today based on the book “Down and Out in Paris and London” in terms of poverty.
• Is It Possible to Reduce Poverty in the United States? Reducing poverty in the United States is possible if such areas as education, employment, and health care are properly examined and improved for the public’s good.
• Poverty Among Seniors Age 65 and Above The social problem is the high poverty rate among older people aged 65 and above. Currently, there are millions of elderly who are living below the poverty line.
• Poverty in 1930s Europe and in the 21st Century US The true face of poverty may be found in rural portions of the United States’ South and Southwest regions, where living standards have plummeted, and industries have yet to begin.
• Social Issue of Poverty in America The paper states that poverty is not an individual’s fault but rather a direct result of social, economic, and political circumstances.
• Poverty, Housing, and Community Benefits The community will benefit from affordable housing and business places, creating job opportunities for the residents and mentoring and apprenticeship.
• The Uniqueness of the Extent of the Poverty Rate in America The United States ranked near the top regarding poverty and inequality, and compared to other developed countries, income and wealth disparity in the United States is high.
• Globalization and Poverty: Trade Openness and Poverty Reduction in Nigeria Globalization can be defined as the process of interdependence on the global culture, economy, and population. It is brought about by cross-border trade.
• Inequality and Poverty in the United States One of the most common myths is that the United States (US) is a meritocracy, where anyone can succeed if they maintain industriousness.
• Christian Perspective on Poverty Several Christian interpretations have different ideas about poverty and wealth. This paper aims to discuss the Christian perspective on poverty.
• Poverty and Problematic Housing in California The question is what are the most vulnerable aspects of the administrative system that lead to an aggravation of the situation of homelessness.
• Race, Poverty, and Incarceration in the United States The American justice system, in its current form, promotes disproportionally high incarceration rates among blacks and, to a lesser degree, Latinos from poor urban neighborhoods.
• Global Poverty and Factors of Influence This paper introduces a complex perspective on the issue of global poverty, namely, incorporating economic, social, cultural, and environmental factors into the analysis.
• Poverty Causes and Solutions in Latin America This paper aims to understand the importance of the interference of Europe in Latin American affairs and its referring to the general principles of poverty.
• Gary Haugen’s Speech on Violence and Poverty In his speech, Gary Haugen discusses the causes of poverty and concludes that violence is a hidden problem that should be addressed and eliminated.
• The Child Poverty Problem in Alabama Alabama has a very high rate of child poverty, where a quarter or 24% of all children can be categorized as poor.
• Poverty Among Blacks in America Poverty is a major social problem in the US and disproportionately affects the Black ethnicity leading to adverse effects on their quality of life.
• Hard Questions About Living in Poverty or Slavery The paper aims to find the answers to several questions, for example, how to remain human while living in the conditions of extreme poverty or slavery.
• Relationship Between Poverty and Health People in 2020
• Solving the Problem of Poverty in Mendocino County
• “Promises and Poverty”: Starbucks Conceals Poverty and Deterioration of the Environment
• Global Poverty and Economic Globalization Relations
• Poverty Prevalence and Causes in the United States
• Policy Development to Overcome Child Poverty in the U.S.
• Global Poverty: Tendencies, Causes and Impacts
• The Impact of Poverty on Children and Minority Groups
• The Problem of Poverty Among Children
• African American Families in Poverty
• Global Issues of World Poverty: Reasons and Solutions
• Effects of Poverty on Health Care in the US and Afghanistan
• Poverty Among Children from Immigrant Workers
• “8 Million Have Slipped Into Poverty Since May as Federal Aid Has Dried Up” by Jason DeParle
• Teenage Pregnancy After Exposure to Poverty: Causation and Communication
• Poverty and Covid-19 in Developing Countries
• Poverty in America: Socio-Economic Inequality
• Poverty and Its Effects Upon Special Populations
• Global Poverty and Education Correlation
• American Dream and Poverty in the United States
• Changing the Face of Poverty
• The Link Between Poverty and Criminal Behavior
• The Cost of Saving: The Problem of Poverty
• Sociological Issues About Social Class and Poverty, Race and Ethnicity, Gender
• Speech on Mother Teresa: Poverty and Interiority in Mother Teresa
• Federal Poverty, Welfare, and Unemployment Policies
• Aid Agency Discussing Different Solutions to Poverty in Urban Areas
• Poverty Elimination in Perspective
• Marriage and Divorce: Poverty Among Divorced Women
• Is Debt Cancellation the Answer to World Poverty?
• Reduction of Poverty in the Rural Areas Through ICT
• Trade Effect on Environmentalism and Poverty
• Gay and Poverty Marriage

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• Can Laziness Explain Poverty in America?
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• Can Employer Credit Checks Create Poverty Traps?
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• Can High-Inequality Developing Countries Escape Absolute Poverty?
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StudyCorgi . "202 Poverty Essay Topics & Examples." September 9, 2021. https://studycorgi.com/ideas/poverty-essay-topics/.

StudyCorgi . 2021. "202 Poverty Essay Topics & Examples." September 9, 2021. https://studycorgi.com/ideas/poverty-essay-topics/.

These essay examples and topics on Poverty were carefully selected by the StudyCorgi editorial team. They meet our highest standards in terms of grammar, punctuation, style, and fact accuracy. Please ensure you properly reference the materials if you’re using them to write your assignment.

This essay topic collection was updated on January 8, 2024 .

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149 Poverty Essay Topics, Examples, & Title Ideas

📝 poverty essay examples, 💡 poverty essay topics, 🪝 catchy titles about poverty to explore, 🌶️ hot poverty research titles, ❓ poverty research topics & questions, 🌍 research topics on poverty in africa, 🇺🇸 essay topics on poverty in america, 💸 titles about poverty in the philippines, 📣 poverty questions for discussion.

Poverty is a complex issue that have affected millions of people around the world for centuries. Scholars define poverty as the state of being unable to meet one’s basic needs for food, shelter, and other necessities. The issue can have far-reaching and devastating consequences for individuals, families, and whole communities.

This collection of poverty essay topics contains research questions, ideas, and titles on poverty in America, Africa, and the Philippines. They are suitable for an argumentative essay, research paper, or speech. You are welcome to use our wealth and poverty essay examples as prompts to make your own research on poverty.

• Bill & Melinda Gates Foundation Role in Society The paper will outline the various things that Bill Gates has done in helping the unprivileged people, and in improving education in the United States.
• Single Mothers in Poverty Many of the single mothers, cannot secure lucrative jobs that would earn them enough income to meet their daily needs and the needs of their children.
• Bill Gates Life and Career Computer programming was a job that Bill Gates loved, and fortunately, his dream became true after occupying himself with computer programming at a tender age.
• The Relationship between Money and Happiness Various academic studies have shown that there is, indeed, a connection between the money you have and your level of happiness, but this connection is not very strong.
• Problem of Hunger in Modern World The purpose of this paper is to present a detailed discussion on hunger. The discussion will begin with an overview of the state of hunger in various parts of the world.
• Immigrants and Immigration Policies: Women and Migration International laws have a provision that mandates states to draft immigration policies. Immigration laws and policies of the US have failed to uphold the rights of immigrants.
• Child Labor, Its Causes, Effects, Counterpolicies The paper gives a broader view of the causes and effects of child labor, economic and socio-cultural perspectives, and efforts put to stop child labor.
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Financial inclusion and poverty alleviation: an empirical examination

Sumanta kumar saha.

1 Financial Stability Department, Bangladesh Bank (The Central Bank of Bangladesh), Flat B2, 52/1, South Basabo, Dhaka 1214 Bangladesh

2 College of Economics, Ritsumeikan University, Nojihigashi 1-1-1, Kusatsu, Shiga 525-0058 Japan

This study analyzes the impact of financial inclusion on poverty reduction in 156 countries belonging to different income groups during the 2004–2019 period. We construct a novel composite financial inclusion index and apply both static and dynamic panel estimation methods to examine the impact of financial inclusion on two different poverty levels. Our results indicate that financial inclusion has a significant negative association with extreme poverty in developing countries but not in high-income countries. The effect of financial inclusion on moderate poverty is weaker than that on extreme poverty. We also examine the conditional relationship between gender inequality and financial inclusion, finding that improvement in gender inequality enhances the effect of financial inclusion on both extreme and moderate poverty in developing countries. The effectiveness of financial inclusion is influenced by how equally the disadvantaged groups, particularly women, can access and utilize financial services. Our findings suggest that policymakers can use financial inclusion as a poverty reduction tool.

Introduction

Poverty alleviation is a key objective for many countries. 1 The World Bank has estimated that roughly 150 million new people will live in extreme poverty due to the recent Covid-19 pandemic (Poverty and Shared Prosperity 2020 : Reversals of Fortune). Due to the recent surge in poverty, identifying policy instruments to alleviate poverty is crucial. One such policy tool is financial inclusion.

Randomized studies by Demirguc-Kunt et al. ( 2017 ), Aker et al. ( 2014 ), and Babatz ( 2013 ) suggest that financial inclusion reduces poverty through access to payment, savings, credit, and insurance services. Cross-country studies by Park and Mercado ( 2018 ), Swamy ( 2010 ), and Omar and Inaba ( 2020 ) demonstrate a negative association between financial inclusion and poverty. Recent studies, including those by Kara et al. ( 2021 ) and Aslan et al. ( 2017 ), suggest that the efficacy of financial inclusion as a policy tool may be affected by the inequality of access to financial services. In particular, disadvantaged groups such as females, ethnic minorities, disabled people, and immigrants have a lower probability of accessing financial services. The next section provides a more detailed literature review.

This study constructs a novel financial inclusion index to examine the effect of financial inclusion on poverty. Our results demonstrate that financial inclusion has a significant negative association with poverty in developing countries but not in high-income countries. 2 Among developing countries, financial inclusion has a stronger association with poverty in upper-middle-income countries than in lower-middle-income countries and low-income countries. Our results also suggest that the effect of financial inclusion on moderate poverty is weaker than that on extreme poverty. We also examine the influence of gender inequality, finding that if gender inequality is reduced, financial inclusion has a stronger negative association with extreme and moderate poverty in developing countries.

Our method follows previous studies with four notable improvements. First, the financial inclusion index constructed in this paper is more comprehensive than the index used in previous studies. The research sample includes data from commercial banks, credit cooperatives, credit unions, and microfinance institutions to assess financial inclusion levels. Second, we divide countries into different groups according to average income level, enabling a comparison of the effects of financial inclusion between countries in different stages of development. Third, we examine two levels of poverty: extreme poverty and moderate poverty. Finally, the influence of gender inequality is examined.

Our findings contribute to the existing literature in several ways. Although we find a negative association between poverty and financial inclusion, as in other studies (Park and Mercado 2018 ; Omar and Inaba 2020 ), we show that the financial inclusion coefficient varies for different national income groups. We argue that unequal access to financial services might explain this behavior. To support our argument, we analyze one specific type of inequality in accessing financial inclusion services; gender inequality. Our analysis expands on previous findings (Kara et al. 2021 ; Aslan et al. 2017 ) by linking inequality in financial access with poverty reduction and empirically demonstrates that if gender equality is improved, the negative association between financial inclusion and poverty amplifies. Our findings emphasize the importance of reducing unequal access to financial services. Moreover, as we show that financial inclusion has a significant association with extreme poverty reduction in most income groups, this supports policymakers’ use of financial inclusion measures as a tool for poverty alleviation.

The remainder of this article is organized into five sections. Section  2 reviews existing literature concerning financial inclusion and poverty; Sect.  3 presents the construction of financial inclusion index; Sect.  4 graphically illustrates the poverty-financial inclusion linkage in various income-groups; Sect.  5 presents the methodology, and empirical results; and Sect.  6 concludes with a summary discussion and proposed recommendations.

Poverty-financial inclusion linkage: review of literature

Financial inclusion can be defined as the process of making formal financial services accessible and functional for the involuntarily excluded portion of the population. According to the World Bank, financial inclusion accommodates payment, savings, credit, and insurance services for individuals and businesses. 3 Kim et al. ( 2018 ) use indicators such as the numbers of ATMs, bank branches, depositors, and borrowers, and the ratio of insurance premium to GDP to measure financial inclusion. Cabeza et al. ( 2019 ) use the access to bank accounts and credit cards, as financial access indicators, to measure financial inclusion. Swamy ( 2010 ) uses priority sector lending as the proxy for financial inclusion.

The problem with such indicators is that no single indicator can capture the multidimensional aspects of financial inclusion. To address this challenge, Amidžić et al. ( 2014 ), Cámara and Tuesta ( 2014 ), Sarma ( 2012 ), and Honohan ( 2008 ) construct composite indices of financial inclusion. Amidžić et al. ( 2014 ) combine dimensions of outreach (geographic and demographic penetration) and usage (depositors and borrowers). In composite index construction, Le et al. ( 2019 ) use principal component analysis for their composite index. Cámara and Tuesta ( 2014 ) and Sarma ( 2012 ) combine dimension-specific indicators of accessibility, availability, and usage to construct a composite index with three sub-indices.

In their review of randomized control-based studies, Demirguc-Kunt et al. ( 2017 ) demonstrate that financial inclusion affects poverty by making payment services, savings, credit, and insurance services available to the poor. These services reduce poverty by increasing the poor's income level or allowing the poor to increase household spending by offering time and cost savings. Aker et al. ( 2014 ) and Muralidharan et al. ( 2014 ) show that digital payment of welfare benefits save cost in the form of avoidance of making a physical trip for cash collection or offering bribes to corrupt officials. These cost savings allow the poor to spend the money for other purposes, which helps reduce poverty. Similarly, Prina ( 2015 ) shows that account payments enhance women's decision-making in the household, thereby increasing the expenditure on education and food. Brune et al. ( 2016 ) and Dupas and Robinson ( 2013 ) demonstrate that savings in a formal financial institution increase private expenditure, business investment, agricultural output, and household expenditures. Although Morduch ( 1999 ) establishes the substantial benefits of micro-credit access, Banerjee et al. ( 2015 ) and Duvendack et al. ( 2011 ) find moderate benefits. All these studies have validated how financial inclusion can alleviate poverty; however, the findings of these randomized experimental studies might not be applicable for cross-country analyses due to the considerable variations among countries.

Various researchers analyze the impact of financial inclusion on poverty using cross-country analyses. Gutiérrez-Romero and Ahamed ( 2021 ) apply the theoretical framework of Ravallion and Datt ( 1992 ) for analyzing the poverty-financial inclusion relationship in 79 low and lower-middle-income countries, finding that financial inclusion primarily reduces poverty through reduction of inequality. Park and Mercado ( 2018 , 2015 ) analyze the impact of financial inclusion on poverty and income inequality both globally and for developing Asian countries, determining that financial inclusion significantly reduces poverty for the entire sample and Asian developing countries. More recently, Omar and Inaba ( 2020 ) investigate the impact of financial inclusion on poverty and income inequality in 116 developing countries, demonstrating that financial inclusion significantly reduces poverty rates in developing countries. Cabeza et al. ( 2019 ) demonstrate that greater financial inclusion of women encourages economic participation of women and positively affects economic development.

Country-specific studies also find that financial inclusion helps reduce poverty. Swamy ( 2010 ) examines priority sector lending in India, finding that financial inclusion through prioritized lending can achieve inclusive growth by reducing the rural poverty rates. Abor et al. ( 2018 ) analyze the impact of financial inclusion and mobile telephone penetration on poverty in Ghana using 16,772 Ghanaian households. The study results show that mobile penetration and financial inclusion help smooth consumption and significantly reduce the probability of a household becoming poor and are correlated with an increase in per capita household consumption of food and non-food items. Though these cross-country and country-specific studies analyze the poverty-financial inclusion relationship from different perspectives, they lack a comprehensive panel data analysis on countries in different stages of development. Moreover, most studies use a limited set of variables when constructing financial inclusion indices.

Though previous studies indicate that financial inclusion negatively correlates with poverty, its impact on poverty could be weaker if access to finance fails to reach the targeted group. Kara et al. ( 2021 ) review the growing evidence regarding whether individuals' demographic characteristics (i.e., gender and race) and socioeconomic features (i.e., income and education) affect access to credit. They determine that less education, less financial literacy, lower income, and less wealth correlates with decreased access to credit. Moreover, women, ethnic minorities, disabled people, and immigrants are more likely to be excluded from the formal credit markets. Similarly, in a recent International Monetary Fund (IMF) study, Aslan et al. ( 2017 ) find inequality among households, particularly female-led households, in accessing the benefit of financial inclusion. These findings necessitate the investigation of how unequal access to financial services affects the impact of financial inclusion on poverty.

Researchers analyze poverty-financial inclusion linkage from different perspectives; however, some questions remain unanswered. Existing studies have not adequately analyzed how financial inclusion might affect poverty based on the income levels of different nations. Moreover, how inequality in access to financial services affects the effectiveness of financial inclusion on poverty alleviation has not been evaluated. This study investigates these issues by constructing a novel composite financial inclusion index to analyze how financial inclusion affects poverty in different income groups of countries. Furthermore, the study examines the effect of gender inequality on poverty reduction through financial inclusion.

Construction of composite financial inclusion index

To measure country-wise financial inclusion, we construct an equal-weighted composite financial inclusion index. Rather than relying on one specific indicator, we construct the index using data from commercial banks, credit cooperatives, credit unions, and microfinance institutions. We collect our data primarily from the Financial Access Survey of the IMF. Six different indicators are used for the index construction. The details of the indicators and their standardized scores are presented in Table ​ Table1. 1 . The composite index has a score of zero and one, where a higher score indicates a higher level of financial inclusion.

Indicators used for the construction of financial inclusion index

FAS financial access survey, The IMF. Calculation: Authors’ assessment

Following Sarma ( 2012 ), we construct the index of financial inclusion, estimating the standardized score for each indicator by applying Eq. ( 1 ).

where d it measures the standardized value for the indicator/dimension of a country at time t , x ijt represents the actual value of indicator i for country j at time t , m i is the minimum value and M i is the upper limit of indicator i . We assign zero as the minimum value. To avoid the influence of extreme values in standardizing, we use the 90th-percentile value of each indicator as to the upper limit. If any country score exceeds one due to this upper limit, we set that score to one. This standardization ensures an indicator-specific standardized score ( dit ) that lies between zero and one.

After standardizing the indicators, we aggregate indicators based on normalized Euclidean distance as follows:

In Eqs. ( 2 )–( 4 ), FII represents the financial inclusion index score for each country. The composite index of each country has a value between zero and one, where higher values indicate a greater level of financial inclusion. X 1 is the Euclidian distance from the worst point, X 2 is the inverse distance from an ideal point, d i represents dimension or indicator specific scores of the countries obtained from Eq. ( 1 ), and w i represents the weight assigned to each dimension. As we use total six dimensions and assign equal weight to each dimension, the weight of each dimension is set as 1/6, i.e., w 1 = w 2 = w 3 = w 4 = w 5 = w 6 = 1 6 .

Our method follows Sarma ( 2012 ); however, there are notable differences. We use six dimensions instead of the three proposed by Sarma (2012). Moreover, we treat each indicator as a separate dimension, as opposed to using a weighted average of multiple indicators. We also use equal weights for each dimension and ensure that if any dimension has a missing value in any particular period, the corresponding weights in Eqs. ( 3 ) and ( 4 ) also remain zero. This approach is better suited for unbalanced panel data with missing values. We discuss the rationale for using equal weights in more detail in Appendix C, where we also compare our proposed index with an index constructed using Sarma’s ( 2012 ) methodology.

The composite index has maximum, minimum, and average values of 1, 0.094, and 0.851, respectively, for all countries during 2004–2018. The country-wise index is presented in Appendix B. Averages of log poverty headcount ratio and financial inclusion score of the countries for each year are plotted in panel A of Fig.  1 . We use a log poverty headcount ratio of USD 1.9 per day to measure poverty. The fitted line has a negative slope in the scatter plot diagram, suggesting that higher financial inclusion might be negatively associated with poverty.

Poverty–financial inclusion relationship and financial inclusion index in different countries.

Source: Financial Access Survey (FAS), the IMF. Calculation: Authors' assessment

Panel B of Fig.  1 shows gradual progress in financial inclusion for different income groups of countries during the 2004–2019 period. 4 We also use the average value of the financial inclusion index of each country group to construct the figure. A rising trend of financial inclusion, measured by the composite financial inclusion index, is found for all country income groups. The graph also depicts that although each country group has maintained an uptrend, lower-income countries also have a lower level of progress in financial inclusion. This suggests that the impact of financial inclusion might differ for different income groups. To address this issue, we separately analyze the impact of financial inclusion for each group of countries.

Financial inclusion and poverty in different groups of countries

In this segment, we graphically present some stylized facts regarding the linkage of extreme poverty and financial inclusion. We measure extreme poverty using the log poverty headcount ratio at USD 1.9 per day, which is defined as the percentage of the population living on less than USD 1.9 per day adjusted for 2011 international prices. Figure  2 plots log poverty headcount and financial inclusion scores for different country income groups. Following the World Bank’s income categories, we classify countries into four groups: high-income, upper-middle-income, lower-middle-income, and low-income countries. Developing countries include upper-middle-income, lower-middle-income, and low-income countries.

Poverty and financial inclusion across countries in various income groups.

In panel A of Fig.  2 , developing countries show a steady increase in financial inclusion and a continuous drop in the poverty rate. Panel B of Fig.  2 focuses on low-income countries, and the graph indicates a lower level of financial inclusion and higher extreme poverty rates in low-income countries compared to other countries. Unequal access to financial services is a possible reason for this result. Previous studies have suggested that less wealthy people, women, and other disadvantaged groups have less opportunity to access financial products, and such disadvantaged groups are assumed to be relatively substantial in low-income countries. Enabling financial inclusion for these disadvantaged groups should advance extreme poverty reduction. In panel C, lower-middle-income and low-income countries present a trend similar to developing countries. The similarity is expected as these countries are also a substantial portion of developing countries. Panel D shows that the poverty rate is meager in high-income countries, and the relation between poverty and financial inclusion is not apparent.

Figure  2 shows that despite some recent marginal increases, the overall poverty rate appears to be falling in most countries. Although there are some periods when poverty increases despite improvement in financial inclusion. Overall, Fig.  2 suggests a negative association between financial inclusion and poverty.

Empirical examination of the poverty–financial inclusion relationship

Model specification, data, and method.

We collect data from the IMF’s Financial Access Survey (FAS) to construct the composite financial index. We also use the IMF’s financial development index database for financial development indicator, the UNDP database for gender inequality index (GII), the World Bank’s World Governance Indicator (WGI) for the “Rule of law” variable, and the World Bank’s World Development Indicators (WDI) for most other control variables. The list of variables, their definitions, and data sources are presented in Table ​ Table2 2 .

Definitions of variables and data sources

The dataset in this study includes 156 countries from 2004 to 2019. Table ​ Table3 3 presents the descriptive statistics of the key variables. Log poverty headcount at USD 1.9 per day, which measures the proportion of people living on less than USD 1.9 per day, is our dependent variable which we use as a proxy to measure extreme poverty. Similarly, we use log poverty headcount at USD 3.2 per day to measure moderate poverty. Table ​ Table3 3 presents that the log poverty headcount has a significant standard deviation, indicating that poverty levels in countries vary significantly. Our primary independent variable is a financial inclusion index with values between 0.094 and 1. Among the control variables, GDP growth per capita has the widest dispersion.

Descriptive statistics of the key variables: all countries

Source: World Development Indicators (WDI), World Governance Indicators (WGI), The World Bank, Financial Access Survey (FAS), The IMF. Computation of Financial Inclusion Index: Authors' calculation

We apply the dynamic two-stage system generalized method of moments (GMM) panel estimation method to this data set. As the two-stage system GMM method uses both level and lag value of the variables as instruments, it is more suitable for addressing the endogeneity and serial correlation issues than the fixed-effect method. Our model specification for the system GMM method is shown in Eq. ( 5 ).

where the dependent variable is the log poverty headcount ratio at USD 1.9 per day ( lnpovheadl it ), which is a measure of extreme poverty. The composite financial inclusion index ( FII it ) is an independent variable. The lag-dependent variable ( lnpovheadl i t - 1 ) is used as a separate independent variable, as per the specification of the system GMM method. Z is a vector of control variables, including GDP growth per capita, log Gini, school enrollment, and the rule of law. 5

We expect a negative coefficient for the financial inclusion index, indicating that financial inclusion can reduce extreme poverty. We select the control variables from previous studies (Gutiérrez-Romero and Ahamed 2021 ; Omar and Inaba 2020 ; Park and Mercado 2018 ), but we apply dynamic panel analysis instead of static analysis in earlier studies. GDP growth per capita assesses the impact of income growth on poverty, and log Gini captures the impact of the unequal income distribution. We expect GDP growth to have a negative coefficient because higher income should reduce poverty. Log Gini is expected to have a positive coefficient because higher inequality in income distribution disproportionately favors the rich and is detrimental to poverty reduction. We use school enrollment as a proxy for human capital development and expect a negative coefficient. In addition, the rule of law is chosen as a proxy for institutional quality. Adherence to the rule of law should enable poverty reduction by ensuring the smooth functioning of regulatory mechanisms.

Though we primarily apply the system GMM method for our analysis, we also checked the robustness of our results based on the static (fixed-effect) regression method. Data requirements of the system GMM method make it difficult to analyze the above model for a wide range of countries. In contrast, the fixed-effect method enables the analysis of many countries. Though the fixed-effect method is less suited to address endogeneity than the system GMM method, it is otherwise suitable for analyzing panel data, as it controls for country-specific influence by incorporating country fixed effect. Previous studies by Gutiérrez-Romero and Ahamed ( 2021 ), Omar and Inaba ( 2020 ), and Park and Mercado ( 2018 ) have also applied this method in analyzing poverty–financial inclusion linkage. We apply the fixed-effect estimation technique in this study primarily for checking robustness. The model specification of this method is shown in Eq. ( 6 ).

where η i is the country fixed-effect coefficient and control variables in vector Z it are the same as in Eq. ( 5 ). In addition to examine the effects of gender inequality, we include the GII as a control variable in this model. The interaction between the financial inclusion index and gender inequality is also included.

Before conducting the empirical regression analysis, we perform several statistical tests. We have an unbalanced panel database with missing values; thus, we apply Fisher-type unit root tests with Phillips–Perron criteria to assess the stationarity properties of the variables. We find that almost all of the variables are stationary at level. To check multicollinearity, we examine the correlation matrix for different income groups of countries. As correlations appear to be moderate in most cases, we assume that multicollinearity problem is not an issue for our study. We perform the Hausman test to determine the appropriate static model, finding that the fixed-effect model is appropriate. We apply the panel Granger causality test and find that financial inclusion Granger causes poverty, and there is no reverse causality. We perform the modified Wald test and find heteroskedasticity in the data. To rectify the issue, we use robust standard errors.

Empirical results

Impact of financial inclusion on extreme poverty.

Table ​ Table4 4 presents the results obtained using the system GMM method. The diagnostic tests indicate that all GMM requirements are satisfied and the model is well specified. 6 Even after incorporating all the relevant control variables, financial inclusion has a significant negative coefficient, suggesting that financial inclusion has negative association with poverty in developing countries. This result is congruent with the findings of previous cross-country studies (Park and Mercado 2018 ; Swamy 2010 ; Omar and Inaba 2020 ). Previous studies, such as Demirguc-Kunt et al. ( 2017 ) and Aker et al. ( 2014 ), argue that financial inclusion seems to expand opportunities to involuntarily excluded portions of society by offering credit, savings, insurance, and digital financial services, which smoothens consumption, increases efficiency, and raises labor force participation, leading to poverty reduction. The results in Table ​ Table4 4 align with these arguments.

Extreme poverty and financial inclusion in developing countries: dynamic two-stage system GMM panel method

Dynamic twostage system GMM panel method. The first column analyzes the impact of financial inclusion on poverty using GDP growth per capita as a control variable. In models (2), (3), and (4), we add log Gini, school enrollment, and the rule of law as additional control variables, respectively. Significance, *** p  < 0.01, ** p  < 0.05, and * p  < 0.1. Robust standard errors are in parentheses

Among other variables, log Gini has a significant and positive coefficient, and GDP growth per capita has expected negative coefficients though the coefficient is not always significant. These results indicate that countries can reduce poverty by lowering income inequality and expanding GDP growth.

In Table ​ Table5, 5 , we present the results of the fixed-effect analysis, in which the number of countries is much larger than in the system GMM analysis. Even after incorporating all the control variables, the financial inclusion index has a statistically significant negative coefficient. This result supports our findings using the system GMM method and aligns with previous studies (Park and Mercado 2018 ; Swamy 2010 ). Among the control variables, log Gini is significant with a positive coefficient, while school enrollment is also significant with expected negative sign. Increased school enrollment is likely to contribute to poverty eradication by improving human resources and cultivating improved skills for boosting productivity.

Extreme poverty and financial inclusion in developing countries: fixed-effects method

Panel fixed-effect method. Significance, *** p  < 0.01, ** p  < 0.05, and * p  < 0.1. Robust standard errors are in parentheses

Table ​ Table6 6 presents the results of system GMM analysis for different income groups of countries. This analysis is essential because financial inclusion and other control variables might affect countries in various stages of development differently. Classifying countries according to their income levels allows us to assess the impact of financial inclusion on countries in similar stages of development. The system GMM results in Table ​ Table6 6 demonstrate that financial inclusion has negatively coefficients with poverty in all countries case, upper-middle-income countries, and lower-middle-income and low-income countries, but not for high-income countries. 7 These results broadly support our earlier findings in Table ​ Table4. 4 . In high-income countries, financial inclusion seems not to have a significant association, or an expected negative coefficient. Since high-income countries have very low existing extreme poverty rates, further poverty reduction through financial inclusion seems challenging.

Extreme poverty and financial inclusion: various groups of countries (GMM)

Dynamic two-stage system GMM panel method. All countries include high-income, upper-middle-income, lower-middle-income, and low-income countries. Significance, *** p  < 0.01, and ** p  < 0.05, * p  < 0.1. Robust standard errors are in parentheses

Table ​ Table7 7 adopts the fixed-effect method to investigate the impact of financial inclusion on poverty in different income groups of countries, thus finding that financial inclusion has a significant negative correlation with extreme poverty in all countries case, in upper-middle-income countries, and in lower-middle-income and low-income countries, but not in high-income countries. Among the income-based country groups with significant coefficients, the significance level and magnitude of financial inclusion coefficient in lower-middle-income and low-income countries are weaker than in upper-middle-income countries. Inequality in accessing financial services could explain this issue. As lower-middle-income and low-income countries have lower levels of financial inclusion and higher gender inequality than upper-middle-income countries, financial inclusion has a weaker association with poverty in lower-middle-income and low-income countries. 8 Moreover, lower-middle-income and low-income countries have lower average income and lower school enrollment levels than upper-middle-income countries. 9 Kara et al. ( 2021 ) indicated that people with less income, education, and financial literacy are less likely to access financial services. So, we can argue that financial services are likely to be more unequally shared in lower-middle-income and low-income countries than in upper-middle-income countries. In summary, Tables ​ Tables6 6 and ​ and7 7 confirm that financial inclusion has different levels of association with poverty in different income groups of countries, and it does not have a significant association in high-income countries.

Extreme poverty and financial inclusion: various groups of countries (fixed-effect method)

Panel fixed-effect method. “All countries” includes high-income, upper-middle-income, lower-middle-income, and low-income countries. Significance, ***p < 0.01, **p < 0.05, and *p < 0.1. Robust standard errors in parentheses

Impact of financial inclusion on moderate poverty

In this section, we examine the effect of financial inclusion on moderate poverty, defined as the log of poverty headcount ratio at USD 3.2 per day, as per 2011 purchasing power parity estimates. Table ​ Table8 8 presents the system GMM results for different income groups of countries. Financial inclusion has a significant negative coefficient only for developing countries. This suggests that reducing moderate poverty through financial inclusion by raising national incomes to a higher level is more challenging than improving extreme poverty.

Moderate poverty and financial inclusion: various group of countries (GMM)

Dynamic two-stage system GMM panel method. “All countries” include high-income, upper-middle-income, lower-middle-income, and low-income countries. “Developing countries” include upper-middle-income, lower-middle-income and low-income countries. Significance, ***p < 0.01, **p < 0.05, and *p < 0.1. Robust standard errors are in parentheses

Table ​ Table9 9 analyzes the impact of financial inclusion on moderate poverty using the fixed-effect method, revealing that financial inclusion has a negative association with moderate poverty in each income group of countries, except high-income countries. However, the magnitude of the negative coefficient is weaker in Table ​ Table9 9 than the extreme poverty case in Table ​ Table7, 7 , suggesting that moderate poverty is harder to alleviate through financial inclusion than extreme poverty. In summary, from Tables ​ Tables8 8 and ​ and9, 9 , we can conclude that financial inclusion has significant negative association with moderate poverty, particularly in the case of developing countries, and our previous findings are robust.

Moderate poverty and financial inclusion: various group of countries (fixed-effect method)

Panel fixed-effect method. “All countries” include high-income, upper-middle-income, lower-middle-income, and low-income countries. “Developing countries” include upper-middle-income, lower-middle-income and low-income countries. Significance, *** p  < 0.01, ** p  < 0.05, and * p  < 0.1. Robust standard errors are in parentheses

Impact of gender inequality in poverty reduction through financial inclusion

In this section, we investigate the influence of unequal access to financial services. Kara et al. ( 2021 ) show that financial services are not equally accessible among less educated people, women, and other vulnerable groups. If financial inclusion cannot reach its target group, it is difficult to use this tool for poverty alleviation. In this study, we focus on gender inequality because women are one of the key groups that lack access to financial products (Aslan et al. 2017 ; Sandhu et al. 2012 ).

According to United Nations Development Programme (UNDP), gender equality measures women's reproductive health, empowerment, and economic status. As a measure of gender inequality, we use the gender inequality index, whose scores range between 0 and 1 with higher scores indicating higher gender inequality. Panel A of Fig.  3 shows that countries with higher poverty levels generally have higher gender inequality. Panel B suggests that countries with higher financial inclusion tend to have low gender inequality despite the substantial country variation.

Gender inequality, poverty, and financial inclusion in developing countries

High gender inequality also indicates poor health, lower school enrollment, and lower labor force participation by women. So, if gender inequality is reduced, women can capitalize on the benefits of financial inclusion by engaging more in economic activities, which should positively affect poverty reduction. We apply conditional analysis and use the interaction of gender inequality index and financial inclusion to examine this idea. 10 The results are presented in Table ​ Table10 10 .

Conditional analysis: impact of gender inequality and financial inclusion on poverty (developing countries, fixed-effect method)

Panel fixed-effect method. Gender inequality index (GII) has a score between zero and one where low score indicates more gender equality. Significance, *** p  < 0.01, ** p  < 0.05, and * p  < 0.1. Robust standard errors are in parentheses

Table ​ Table10 10 evaluates the impact of financial inclusion and gender inequality for moderate and extreme poverty in developing countries. In both cases, the interaction terms have significant positive coefficients, suggesting that a higher level of gender inequality will reduce financial inclusion’s association with poverty reduction. The net effect of financial inclusion (− 9.195 + 15.79 × GII for moderate poverty and − 12.42 + 20.87 × GII for extreme poverty) suggests that lowering gender inequality may improve the reduction of poverty through financial inclusion. The net effect is robust because financial inclusion and its interactions with gender inequality variables are also jointly significant. These findings support the arguments of previous researchers about the influence of gender inequality on the impact of financial inclusion (Kara et al. 2021 ; Aslan et al. 2017 ).

Our findings have several practical implications for different agents and countries. As panel B of Fig.  1 indicates that financial services have not yet reached all groups of people in developing countries, we recommend that financial institutions expand their business by offering customized financial services that meet the need of the users. To encourage financial institutions to expand financial services to women or the poor, central banks and other regulators of the financial market should design policies that reward financial institutions that provide financial services to the disadvantaged group. Since we find a significant negative association between financial inclusion and poverty, we recommend that governments in developing countries utilize financial inclusion initiatives such as digital transfer of financial assistance or expanding SME loans to counter the recent surge in poverty caused by the covid-19 pandemic. As we find that reducing gender inequality supports poverty reduction through financial inclusion initiatives, Governments should take initiatives to promote gender equality by increasing education and employment opportunities for women. Our results also suggest that the impact of financial inclusion is more prominent in upper-middle-income countries. So, we recommend that lower-middle-income and low-income countries adopt policies that expand the reach of financial inclusion by encouraging the disadvantaged group to use financial services.

Financial inclusion expands opportunities for the poor by enabling them to access and use financial services. The use of financial services may reduce poverty by stimulating the income of the poor or by achieving cost savings or efficiency gains that allow the poor to increase their household spending. Studies identify that financial inclusion can boost the income of the poor by financing new business establishments (Kara et al. 2021 ); enabling the poor to take on more risk by offering insurance services (Karlan et al. 2014 ; Cole et al. 2013 ); and expanding employment opportunities, especially for women (Cabeza et al. 2019 ; El-Zoghbi et al. 2019 ). Savings and digital financial services may also reduce poverty by allowing households to save more and smooth consumption (Demirguc-Kunt et al.  2017 ). Though the study cannot establish which causal channel works for developing countries, the results suggest a significant negative association between financial inclusion and poverty. Moreover, the study also reveals that the association between financial inclusion and poverty varies with the countries' income levels. Due to a higher level of economic development, countries with higher income usually have a higher demand for and supply of financial services, enabling more people to be financially included and perhaps inducing faster poverty reduction.

The study has one possible limitation. Though our analysis suggests some probable channels, it could not specify the exact causal channels through which financial inclusion affects poverty. This issue can be investigated in the future when we have more information available on how the poor in developing countries utilize financial services.

In this study, we construct a novel composite financial inclusion index. Applying the two-stage system GMM and fixed-effect methods, we explore how financial inclusion affects poverty in countries classified into different income groups. We also examine the impact of financial inclusion on extreme and moderate poverty. The results suggest that financial inclusion has a significant negative association with extreme poverty in developing countries but not in high-income countries. Moreover, the coefficient of financial inclusion is smaller in lower-middle-income and low-income countries than in upper-middle-income countries. Inequality in accessing financial services could be the reason behind the variation in results. Low-income countries are expected to have higher inequality in access to financial services; therefore, the coefficient of financial inclusion is weaker in these countries. We also find that the association between financial inclusion and moderate poverty is weaker than that of extreme poverty. Finally, we found that lowering gender inequality may improve poverty reduction through financial inclusion. These findings suggest that improving financial inclusion alone is insufficient to increase the income levels of the poor substantially. Especially in lower-middle-income and low-income countries, an important precondition is to make financial services more accessible to disadvantaged groups.

Acknowledgements

We acknowledge the two reviewers for their valuable comments and observations.

Appendix A: List of countries included in the sample

Appendix b: composite financial inclusion index (fii). (constructed for all but only scores of developing countries are reported), appendix c: comparison of equal weighted index and unequal weighted index.

The use of equal weighting is preferable because assigning different weights for different indicators according to economic logic is challenging. Because of missing values in many indicators, assigning different weights affects countries' financial inclusion index scores disproportionally. Due to missing values, the covariance matrix of the principal-component analysis will also be affected.

We construct the unequal-weighted financial inclusion index using weights proposed by Sarma ( 2012 ). 11

Table ​ index)3,0080.6690.2090.074111 11 shows that both the indices have the same range, but the unequal weighted index has a lower mean and higher standard deviation than the equal-weighted index. We argue that this high dispersion results from assigning different weights in an unbalanced dataset with missing values. The low standard deviation also suggests that the equal-weighted index is better suited to handle missing values.

Financial inclusion index with equal weight and unequal weight

Table ​ parentheses12 12 shows the impact of financial inclusion on poverty in developing countries using the two indices. Both indices show a significant impact of financial inclusion on poverty reduction, but the equal-weighted index has higher coefficients than the unequal-weighted index. So, the comparison indicates that the simple equal-weighted index can evaluate financial inclusion adequately.

Poverty-financial inclusion relationship in developing countries using equal-weighted and unequal-weighted financial inclusion index

Dynamic two-stage system GMM and fixed-effect panel methods. The weights used by Sarma ( 2012 ) has been used in constructing the unequal-weighted financial inclusion index. Significance, *** p  < 0.01, ** p  < 0.05, and * p  < 0.1. Robust standard errors are in parentheses

The authors have no relevant financial or non-financial interests to disclose. The authors certify that they have no affiliations with or involvement in any organization or entity with any financial interest or non-financial interest in the subject matter or materials discussed in this manuscript. The authors have no financial or proprietary interests in any material discussed in this article.

Declarations

The authors have no conflict of interest to declare that are relevant to the content of this article.

1 As decided by the United Nations, ending poverty by 2030 is the number one Sustainable Development Goals (SDG-1) of member countries (UNDP Website 2021 ).

2 We use the World Bank’s income categories to classify countries into four groups: high-income, upper-middle-income, lower-middle-income, and low-income countries. Upper-middle-income, lower-middle-income, and low-income countries are labeled as developing countries. The list of countries organized by income groups is presented in Appendix A.

3 This view references the financial inclusion overview section of the World Bank website (2021).

4 We do not plot a separate graph for lower-middle-income countries. Instead, we form a country group that combines lower-middle-income and low-income countries. This grouping is done to increase data availability for our regression analysis, as low-income countries do not have sufficient data. To remain consistent with our country grouping for regression analysis, we also present the combined graph of lower-middle-income and low-income countries in panel B of Fig.  1 .

5 Omar and Inaba ( 2020 ) use financial development as a control variable. Due to the potential multicollinearity problem, we do not include financial development. However, our examination suggests that the results of this study remain valid even if we include financial development.

6 In Table ​ Table4, 4 , the number of countries is greater than the number of instruments. Moreover, the null hypothesis of no second-order autocorrelation cannot be rejected. Similarly, the null hypothesis of no over-identification problem cannot be rejected. These tests results confirm that the dynamic two-stage system GMM panel method is applicable for our analysis.

7 This method cannot evaluate lower-middle-income and low-income countries due to the limitation of data (the number of countries is smaller than the number of instruments).

8 The average gender inequality index (GII) score is 0.377 in upper-middle-income countries and 0.529 in lower-middle-income and low-income countries, suggesting more gender equality in upper-middle-income countries. Panel B of Fig.  1 indicates that upper-middle-income countries also have a higher financial inclusion level.

9 In upper-middle-income countries, average gross secondary school enrollment ratio is 89.19% and per capita GDP is USD 6483. In lower-middle-income and low-income countries, average school enrollment is 54.89% and per capita GDP is USD 1,532.

10 Other aspects of inequality in financial services could be investigated in the future when high-frequency data on such aspects become available for analysis.

11 The Sarma ( 2012 ) methodology uses three dimensions but multiple indicators in each dimension in constructing the financial inclusion index. We apply the indicators in Table ​ Table1 1 to get the scores for those three dimensions.

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Correspondence to Yakubu Aliyu Bununu .

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European School of Sustainability, Hamburg University of Applied Sciences, Hamburg, Hamburg, Germany

Walter Leal Filho

Center for Neuroscience & Cell Biology, University of Coimbra, Coimbra, Portugal

Anabela Marisa Azul

Faculty of Engineering and Architecture, Passo Fundo University Faculty of Engineering and Architecture, Passo Fundo, Brazil

Luciana Brandli

Istinye University, Istanbul, Turkey

Pinar Gökcin Özuyar

International Centre for Thriving, University of Chester, Chester, UK

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School of Sustainability Arizona State University, Tempe, USA

Rimjhim M Aggarwal

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Bununu, Y.A. (2020). Poverty Reduction: Concept, Approaches, and Case Studies. In: Leal Filho, W., Azul, A., Brandli, L., Özuyar, P., Wall, T. (eds) Decent Work and Economic Growth. Encyclopedia of the UN Sustainable Development Goals. Springer, Cham. https://doi.org/10.1007/978-3-319-71058-7_31-1

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DOI : https://doi.org/10.1007/978-3-319-71058-7_31-1

Received : 23 August 2019

Accepted : 08 September 2019

Published : 10 January 2020

Publisher Name : Springer, Cham

Print ISBN : 978-3-319-71058-7

Online ISBN : 978-3-319-71058-7

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