Effects of Financial Inclusion on Poverty in WAEMU: Empirical Evidence Through the Channels of Income Inequality and Growth

Abstract

In WAEMU, financial inclusion has been made a priority with the adoption in 2016 of the Regional Financial Inclusion Strategy. It constitutes a privileged instrument promoting the integration of the most disadvantaged social strata into the economic and social fabric of the Union. This paper examines the contribution of financial inclusion to poverty reduction. The study focuses on the eight WAEMU countries and covers the period 2008-2020. The results obtained by the method of triple least squares show that on the one hand financial inclusion reduces income inequality and subsequently reduces poverty and that on the other hand it does not affect economic growth. Robustness tests indicate that the overall rate of use of financial services reduces poverty both by increasing overall income and by reducing income inequality. These tests also show that for countries not plagued by terrorism, financial inclusion reduces poverty through reduced inequality and increased overall income. On the basis of these results, the paper formulates recommendations that could serve as a guideline for poverty reduction policies in WAEMU.

Keywords: Financial inclusion, aggregate income, poverty

DOI: 10.7176/JESD/14-13-01

Publication date:August 31^st 2023