Financial inclusion and poverty: a tale of forty-five thousand households

Abstract

Using a new nationally representative survey data covering approximately 45,000 Indian households, we examine the effects of financial inclusion on poverty. We construct a multidimensional indicator of financial inclusion and examine the effects of financial inclusion on multiple measures of poverty including the household Poverty Probability Index (PPI), household deprivation scores, and poverty line. We find that financial inclusion has a strong poverty-reducing effect. This finding is consistent across the different measures of poverty used, and alternative ways of measures financial inclusion. These results underpin the importance of financial inclusion and the need for its promotion across countries.