Role of Financial Inclusion in Economic Growth and Poverty Reduction in A Developing Economy

This study is to empirically investigate the role of financial inclusion in poverty reduction and economic growth in a developing economy using panel data analysis ranges from 2006 to 2015 within a log linear model specification framework. The methodology applied to the study is distilled from the literatures. From our regression result, the numbers of active ATM, bank branches and government expenditures selected from three Africa countries were the most robust predictors for financial inclusion on poverty reduction in a developing economy. One percent increase on ratio of active ATM will leads to about 0.0082 percent increase in the gross domestic product and a reduction of poverty in developing economy, this however does not perfectly corroborate with Sarma (2008). An indicator shows that most of the ATM in developing economy are obsolete and thus required a technological upgrade to have a significant impact in rural areas. The coefficient of determination was very high. It shows that about 92 percent of the total variations in real growth rate of gross domestic product are explained by all the independent variables in the model. Consequently the study recommends that Government should focus on poverty reduction through focus on infrastructural development that will enhance banking services.