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Does Financial Development Really Matter for Poverty Reduction in Africa?

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  • Segun Thompson Bolarinwa
  • Olumide Olusegun Olaoye
  • Wajahat Ullah
  • Babatunde Agbi

Abstract

This paper revisits the financial development–poverty nexus. The study builds a robust measure of financial development that captures the state of financial development in Africa. We adopt the measure for examining the relationship between 1996 and 2015. Our results agree with a priori expectation. Overall, we find a reducing effect of financial development on absolute poverty but this does not affect relative poverty. Private credit has a poverty-reducing effect; however, total financial development and financial inclusion do not affect poverty in African countries. Also, stability and efficiency increase poverty levels. Considering the low level of financial inclusion in the continent, it is likely that financial development will reduce poverty in the continent if the poor can access credits. Our results should be interpreted with caution, the commercial banking model may not adequately address poverty in Africa. Hence, much should not be expected in policy circles from financial development for poverty reduction in the present state of financial development in Africa.

Suggested Citation

  • Segun Thompson Bolarinwa & Olumide Olusegun Olaoye & Wajahat Ullah & Babatunde Agbi, 2022. "Does Financial Development Really Matter for Poverty Reduction in Africa?," Forum for Social Economics, Taylor & Francis Journals, vol. 51(4), pages 415-432, October.
    • Handle: RePEc:taf:fosoec:v:51:y:2022:i:4:p:415-432
    DOI: 10.1080/07360932.2021.1896564
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    Cited by:

    1. Francis Lwesya & Adam Beni Swebe Mwakalobo, 2023. "Frontiers in microfinance research for small and medium enterprises (SMEs) and microfinance institutions (MFIs): a bibliometric analysis," Future Business Journal, Springer, vol. 9(1), pages 1-18, December.
    2. Dhahri, Sabrine & Omri, Anis & Mirza, Nawazish, 2024. "Information technology and financial development for achieving sustainable development goals," Research in International Business and Finance, Elsevier, vol. 67(PA).
    3. Lemnge, Deusdedit & Raphael, Gwahula & Mutasa, Felician, 2024. "The Moderating Effect of Gender Equality in Reproductive health on the Relationship between Financial Development and Poverty Reduction in sub-Saharan Africa: A Quantile Regression Approach," African Journal of Economic Review, African Journal of Economic Review, vol. 12(2), June.

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