The Role Of Financial Inclusion On Poverty Reduction In East Africa: Evidence From Panel Data Analysis

Abstract

Financial inclusion is seen as an enabler to reduce poverty especially,indeveloping region like East Africa.This paper therefore,examined the determinants of the key indicators in financial inclusion that have direct impact in reducing poverty in the region.The study is the panel type that used secondary data from WB and IMF and the panel model called Fixed Effect Model As an effort to achieve sustainable development and increase people’s welfare, financial inclusion has become the policy agenda of many countries . Therefore,the study aimed to investigate the role of financial inclusion on poverty reduction in five East African countries for the period 2004 to 2022. The study used the Financial inclusion index developed by Pricimpal Component analysis from financial inclusion indicators of IMF financial access data base. The result shows that financial inclusion has a negative significant effect on poverty reduction in these countries. The result has also showed that poverty is persistent in a sence that the past year poverty level significantly affect the current level of poverty. From the findings we made the conclusion that financial inclusion and past period poverty level as well as Rule of Law have significantly affect the current level of poverty where policy makers ,development partners and governments in the sub-region should therefore implement policies that are aimed at providing an enabling environment for financial institutions to provide financial services that are readily available and affordable to the public in order to benefit from the desired poverty reduction effect of financial inclusion