Financial Inclusion, Poverty, and Income Inequality in ...

FInAncIAl InclusIon, Poverty, AnD Income InequAlIty In DeveloPIng AsIA

Cyn-Young Park and Rogelio V. Mercado, Jr.

no. 426

January 2015

adb economics working paper series

ASIAN DEVELOPMENT BANK

ADB Economics Working Paper Series

Financial Inclusion, Poverty, and Income Inequality in Developing Asia

Cyn-Young Park and Rogelio V. Mercado, Jr. No. 426 | 2015

Cyn-Young Park (cypark@) is Assistant Chief Economist from the Asian Development Bank. Rogelio V. Mercado, Jr. (mercador@tcd.ie) is a graduate research student from Trinity College Dublin.

Preliminary draft was presented at the conference on "Financial Inclusion, Regulation, and Education" sponsored by the Asian Development Bank Institute in Tokyo, Japan in April 2014.

ASIAN DEVELOPMENT BANK

Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines ? 2015 by Asian Development Bank January 2015 ISSN 2313-6537 (Print), 2313-6545 (e-ISSN) Publication Stock No. WPS157060-3

The views expressed in this paper are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. By making any designation of or reference to a particular territory or geographic area, or by using the term "country" in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. Note: In this publication, "$" refers to US dollars.

The ADB Economics Working Paper Series is a forum for stimulating discussion and eliciting feedback on ongoing and recently completed research and policy studies undertaken by the Asian Development Bank (ADB) staff, consultants, or resource persons. The series deals with key economic and development problems, particularly those facing the Asia and Pacific region; as well as conceptual, analytical, or methodological issues relating to project/program economic analysis, and statistical data and measurement. The series aims to enhance the knowledge on Asia's development and policy challenges; strengthen analytical rigor and quality of ADB's country partnership strategies, and its subregional and country operations; and improve the quality and availability of statistical data and development indicators for monitoring development effectiveness.

The ADB Economics Working Paper Series is a quick-disseminating, informal publication whose titles could subsequently be revised for publication as articles in professional journals or chapters in books. The series is maintained by the Economics and Research Department.

CONTENTS

TABLES AND FIGURES

iv

ABSTRACT

v

I.

INTRODUCTION

1

II. RELATED LITERATURE

2

III. FINANCIAL INCLUSION INDICATOR

4

IV. EMPIRICAL METHODOLOGY AND DATA SOURCES

9

V. EMPIRICAL RESULTS

13

VI. SUMMARY AND POLICY IMPLICATIONS

17

REFERENCES

19

TABLES AND FIGURES

TABLES

1

Financial Inclusion Index

6

2

Regression Results on Financial Inclusion

14

3

Regression Results on Poverty

15

4

Regression Results on Income Inequality

16

FIGURES

1

Financial Inclusion Indicator and Honohan's (2008) Indicator

8

2

Financial Inclusion Indicator and Sarma's (2008) Indicator

8

3

Financial Inclusion Indicator, Developing Asia

9

4

Per Capita Income and Financial Inclusion

10

5

Rule of Law and Financial Inclusion

10

6

Age Dependency Ratio and Financial Inclusion

11

7

Primary School Completion and Financial Inclusion

11

8

Financial Inclusion and Poverty

12

9

Financial Inclusion and Income Inequality

13

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