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Social Indicators Research

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09-06-2021 | Original Research

Does Financial Inclusion Diminish Poverty and Inequality? A Panel Data Analysis for Latin American Countries

Authors: Eduardo Polloni-Silva, Naijela da Costa, Herick Fernando Moralles, Mario Sacomano Neto

Published in: Social Indicators Research | Issue 3/2021

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Abstract

Despite great developmental efforts in recent decades, Latin America still presents high levels of poverty and inequality when compared to developed nations. As explored widely in the literature, one potential instrument to diminish these issues is financial inclusion, including the access and usage of financial services by all people. Specifically, this paper verifies if financial inclusion and technology adoption decrease the poverty headcount ratio and the Gini index (i.e., inequality) of 13 Latin America countries (Argentina, Bolivia, Brazil, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Honduras, Panama, Paraguay, Peru, and Uruguay). To perform such analysis, an unbalanced panel dataset was built, and the Feasible Generalized Least Squares (FGLS) and the Limited Information Maximum Likelihood (LIML) techniques were employed. The results suggest that, in accordance with previous studies, financial inclusion is a powerful tool to tackle poverty and inequality. Additionally, the combined effects of financial inclusions and technology (i.e., mobile use) are also capable of decreasing the poverty and inequality levels. We discuss the policy implications of our findings and suggest a future research agenda.

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Several financial inclusion variables from the FAS-IMF (e.g., 'Number of registered mobile money accounts', ‘Number of credit cards', 'Number of all microfinance institution branches per 1,000 km2', 'Number of all microfinance institution branches per 100,000 adults', etc.) are mostly unavailable for Latin America countries or only started being published in recent years, which is troublesome for a panel dataset.

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Title: Does Financial Inclusion Diminish Poverty and Inequality? A Panel Data Analysis for Latin American Countries
Authors: Eduardo Polloni-Silva
Naijela da Costa
Herick Fernando Moralles
Mario Sacomano Neto
Publication date: 09-06-2021
Publisher: Springer Netherlands
Published in: Social Indicators Research / Issue 3/2021
Print ISSN: 0303-8300
Electronic ISSN: 1573-0921
DOI: https://doi.org/10.1007/s11205-021-02730-7

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