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COVID-19 response needs to broaden financial inclusion to curb the rise in poverty

Author

Listed:
  • Mostak Ahamed

    (University of Sussex Business School, University of Sussex, Brighton, UK.)

  • Roxana Gutiérrez-Romero

    (School of Business and Management, Queen Mary University of London.)

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 78 low- and lower-middle-income countries. Unlike other recent cross-country studies, we show that financial inclusion 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. Our forecasts suggest that the world’s population living on less than $1.90 per day could increase from 8% to 14% by 2021, pushing nearly 400 million people into poverty. However, urgent improvements in financial inclusion could substantially reduce the impact on poverty.

Suggested Citation

  • Mostak Ahamed & Roxana Gutiérrez-Romero, 2020. "COVID-19 response needs to broaden financial inclusion to curb the rise in poverty," Working Papers 105, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    • Handle: RePEc:cgs:wpaper:105
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    File URL: http://cgr.sbm.qmul.ac.uk/CGRWP105.pdf
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    Citations

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    Cited by:

    1. Melain Modeste Senou & Denis Acclassato Houensou, 2024. "From expanding financial services to tackling poverty in West African Economic and Monetary Union: The accelerating role of mobile money," Journal of International Development, John Wiley & Sons, Ltd., vol. 36(3), pages 1707-1737, April.
    2. Rajesh Barik & Sanjaya Kumar Lenka, 2023. "Does financial inclusion control corruption in upper-middle and lower-middle income countries?," Asia-Pacific Journal of Regional Science, Springer, vol. 7(1), pages 69-92, March.

    More about this item

    Keywords

    Financial inclusion; poverty; inequality; COVID-19; forecasts.;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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