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Financial inclusion as a pathway to welfare enhancement and income equality: Micro-level evidence from Nigeria

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  • Saifullahi Sani Ibrahim
  • Huseyin Ozdeser
  • Behiye Cavusoglu

Abstract

While the importance of financial inclusion as a means of poverty and income inequality reduction has long been recognised, the paths to welfare enhancement and income equality through financial inclusion remain partially acknowledged. Using micro-level data on 1 750 rural Nigerian households, this study examines the finance-welfare nexus by constructing a multi-variable financial inclusion index. The results first show that financial inclusion exerts a strong positive influence on household welfare. However, the decomposition analysis shows that middle- and high-income households gain more from financial inclusion in comparison to the targeted low-income households. Second, informal livelihood strategies, such as environmental resource extraction, crops, and livestock production, revealed reduced welfare disparities across income distributions. Therefore, for financial inclusion to alleviate welfare inequality and ensure income convergence, rural financial markets must be redesigned to allow wider access to credit, specifically for low-income and vulnerable households.

Suggested Citation

  • Saifullahi Sani Ibrahim & Huseyin Ozdeser & Behiye Cavusoglu, 2019. "Financial inclusion as a pathway to welfare enhancement and income equality: Micro-level evidence from Nigeria," Development Southern Africa, Taylor & Francis Journals, vol. 36(3), pages 390-407, May.
    • Handle: RePEc:taf:deveza:v:36:y:2019:i:3:p:390-407
    DOI: 10.1080/0376835X.2018.1498766
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    Citations

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    Cited by:

    1. ETUDAIYE-MUHTAR Oyebola Fatima, 2024. "Financial Inclusion And Income Inequality In Nigeria," Management of Sustainable Development, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 16(1), pages 75-87, June.
    2. Mohammed Amidu & Joshua Yindenaba Abor & William Coffie & Agnes Akpene Akakpo, 2021. "Financial Inclusion, Livelihood Activities, and Stock Market Participation," Emerging Economy Studies, International Management Institute, vol. 7(1), pages 23-61, May.
    3. Hao, Yunping & Zhang, Bing, 2024. "The impact of digital financial usage on resident’s income inequality in China: An empirical analysis based on CHFS data," Journal of Asian Economics, Elsevier, vol. 91(C).
    4. Saifullahi Sani Ibrahim & Haruna Mohammad Aliero, 2020. "Testing the impact of financial inclusion on income convergence: Empirical evidence from Nigeria," African Development Review, African Development Bank, vol. 32(1), pages 42-54, March.
    5. Koomson, Isaac & Danquah, Michael, 2021. "Financial inclusion and energy poverty: Empirical evidence from Ghana," Energy Economics, Elsevier, vol. 94(C).

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