Empirical Literature Review on Financial Inclusion and Poverty Reduction

Abstract

In the economic system of countries, financial inclusion plays a vital role. The multi-dimensional concept of financial development is financial inclusion. It ensures access and use at an affordable cost to all individuals of the basic formal financial services. This is obvious because of the global financial crisis when financial institutions continue to provide credit, savings, insurance, payment and transfer services. Thus financial inclusion has an impact on the lower income groups proportionally and significantly. The theory of financial inclusions were reviewed in this paper. Important theories such as Gerschenkron's Great Spurt theory, theory of classical economics, theory of social welfare, finance-growth-nexus theories and theory of contemporary development have been discussed in this Section. The second part was dealt with in Sri Lanka and other regions for the review of empirical studies. Finally, the results showed that many important variables affect poverty alleviation. The main variable of poverty alleviation and the reduction of income inequality within the nation are literacy, household economic status, infrastructure levels and economic policies. This paper concludes with the summary of the empirical review of financial inclusion studies and provides recommendations for the future direction of research.