Lifting You up or Dragging You Down? The Role of Financial Inclusion in Poverty Transitions Among Italian Households

Abstract

We estimate the effect of financial inclusion on transition probabilities into/out of poverty. By exploiting a longitudinal sample of Italian households between 2002 and 2016, we find that financial inclusion is effective in both reducing the likelihood of entering poverty and helping the poor to climb out of it. According to our estimates, access to deposit accounts reduces the risk of falling below the poverty line by 2.7 percentage points (pp) and increases the chance of exiting poverty by 4.4 pp. Significance and magnitude of such effects are confirmed when considering different poverty thresholds and definitions, alternative proxies for financial inclusion as well as alternative empirical strategies.

A systematic conceptual review of financial access

“…Retail banks and credit unions are the foundation on which the provision of mainstream financial products and services are provided (Bramley & Besemer, 2017; Maskara et al, 2021). Products and services discussed include payment, saving, credit, and insurance products (Azevedo et al, 2021; Bettin et al, 2022; Bramley & Besemer, 2017; Cámara, 2017; Rao & Malapit, 2015; Salami et al, 2021). Authors specifically mentioned bank accounts, credit cards and debit cards (Alexander, 2021; Bae et al, 2012; Birkenmaier & Fu, 2019; Mitchell et al, 2019).…”

Financial Inclusion, Poverty, and Income Inequality in Sri Lanka

“…Financial inclusion plays a significant role in reducing the poverty level in different countries. (Bettin and Pigini, 2022;Lal 2017;Mahalika, Matsebula and Yu, 2021;Emara, 2020;Kelimume, 2020;Agyemang-Badu, Agyei & Kwaku,2018). Ajide (2019) explained that Small and Medium entrepreneurs in Africa have greater access to the financial market, resulting in high investment and employment opportunities.…”