Financial inclusion has become an important public policy priority following the recent global financial crisis. Yet, we know very little of how it impacts soundness of the providers of financial services. Using an international sample of 2,600 banks in 86 countries over the period 2004-12, we find that higher level of financial inclusion contributes to greater bank stability. The positive association is particularly pronounced with those banks that have higher customer deposit funding share and lower marginal costs of providing banking services; and also with those that operate in countries with stronger institutional quality. The results are robust to instrumental variables analysis, controlling for bank fixed effects, alternative measures of financial inclusion, among several other robustness tests. Our results highlight that the importance of ensuring inclusive financial system is not only a development goal but also an issue that should be prioritised by banks, as such a policy drive is good for their stability.

No abstract

The ongoing COVID-19 pandemic risks wiping out years of progress made in reducing global poverty. In this paper, we explore to what extent financial inclusion could help mitigate the increase in poverty using cross-country data across 79 low- and lower-middle-income countries. Unlike other recent cross-country studies, we show that financial inclusion, particularly financial outreach, is a key driver of poverty reduction in these countries. This effect is not direct, but indirect, by mitigating the detrimental effect that inequality has on poverty. Our findings are consistent across all the different measures of poverty used and robust to instrumental variables. Our forecasts suggest that by 2021 the world’s population living on less than $5.50 dollars a day would increase by 231 million people, of which nearly 107.8 million people would be pushed into extreme poverty living on less than $1.90 per day. However, urgent improvements in financial inclusion could substantially reduce the impact on poverty.

No abstract

No abstract