Financial Inclusion, Poverty, and Income Inequality in Developing Asia

This paper seeks to help policymakers design and implement programs that will broaden access to financial services, lead to reduction of poverty incidence, and increase income equality. It extends the existing literature on the link between financial inclusion, poverty, and income inequality by focusing on developing Asian economies. The paper constructs its own financial inclusion indicator to assess various macroeconomic and country-specific factors affecting the degree of financial inclusion for 37 selected developing Asian economies. It finds that per capita income, policy, and demographic characteristics significantly affect financial inclusion in the region. The paper suggests that the provisions for young and old-age populations, including enforcement of financial contracts and financial regulatory oversight, will broaden financial inclusion, thereby contributing to poverty reduction and lower income inequality. It covers the following sections in detail:

• Definition of financial inclusion and a discussion on the scope of the study;
• Review of relevant literature;
• Methodology used for the construction of the financial inclusion indicator and stylized facts;
• Empirical methodology, data sources, and determinants of poverty and income inequality;
• Summary of results, discussion on key findings, and policy recommendations.