Catalysing sustainable change: the role of digital finance in poverty alleviation in Asia

Poverty continues to be a major global issue, disproportionately affecting low-income populations. In recent years, the advent of digital finance has presented itself as a potential remedy, offering innovative ways to circumvent the traditional obstacles that have historically hindered low-income individuals’ access to essential financial services. Nevertheless, despite these opportunities, there remains a dearth of research examining whether increased usage of digital financial services contributes to poverty reduction. The main objective of this study is to bridge this research gap by conducting an empirical investigation into the relationship between digital finance usage and poverty levels in Asia spanning from 2014 to 2021. Analysis employing traditional regression models (ordinary least square, fixed-effect, and random-effect) indicates a positive relationship between digital finance usage and poverty reduction. To enhance the robustness of these findings, this study additionally employed quantile regression, instrumental variables regression, and ridge regression, which collectively reinforce the initial results. Overall, this study highlights that digital finance can be an effective way to reach low-income individuals with financial services that allow them to manage finances, build savings, and access credit. Building on these findings, this study suggests implementing policy measures to further promote the use of digital finance in poverty alleviation efforts.