Volume 9, Issue 5, October 2020, Page: 326-333
The Impact of Financial Inclusion on Poverty in Jordan
Tamara Firas Al Maaytah, Department of Business Economics, School of Graduate Studies, University of Jordan, Amman, Jordan
Talib Mohammad Awad, Department of Business Economics, School of Business, University of Jordan, Amman, Jordan
Received: Aug. 3, 2020;       Accepted: Aug. 17, 2020;       Published: Aug. 27, 2020
DOI: 10.11648/j.ijber.20200905.14      View  57      Downloads  56
This study aimed to estimate the long-run impact of financial inclusion along with a set of control variables on the poverty in Jordan during the period spans from 1980 through 2018. The per capita income growth rate was used as an indicator of poverty due to the lack of annual data on poverty indices. The study used the Autoregressive Distributed Lag (ARDL) Model to test for cointegration. Also, both Fully Modified OLS (FMOLS) and Dynamic OLS (DOLS) are used to estimate the long-run model parameters. The ADF (Augmented Dickey-Fuller) results indicate that the variables integrated of order one I(1) or integrated of order zero I(0) but none is I(2). The diagnostic statistical tests necessary to ensure the model’s adequacy and validity indicate that the model is free from statistical problems, and the estimation results are reliable. The bounds test to cointegration provide evidence on the existence of long-run equilibrium relationship among variables, and hence, the variables are cointegrated. The empirical results revealed a positive effect of loans and demand deposits on per capita income, which reflects a reduction in poverty. While the number of bank branches has a negative impact on the per capita income, and hence, increasing poverty. Accordingly, the study recommended improving financial and banking systems to facilitate obtaining loans, increase the number of branches to improve individuals' access to financial services, and raising the interest rate on deposits to encourage investors and capital owners and companies to save in banks.
Jordan, Poverty, Financial Inclusion, ARDL, Per Capita Income
To cite this article
Tamara Firas Al Maaytah, Talib Mohammad Awad, The Impact of Financial Inclusion on Poverty in Jordan, International Journal of Business and Economics Research. Vol. 9, No. 5, 2020, pp. 326-333. doi: 10.11648/j.ijber.20200905.14
Copyright © 2020 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
Hamdan, Badr Shehadeh and Majed Mahmoud Abu Dayyeh (2018), The Impact of Financial Inclusion on Economic Development in Palestine, Economics and Finance magazine, file. 4, p. 2, Hassiba Ben Bou Ali University, Chlef, Algeria.
Harrod Center (2018), Financial Inclusion in Egypt. Do low-income people have a share in making financial instruments availability? Cairo Egypt.
Park, C. Y., & Mercado, R. (2015). Financial inclusion, poverty, and income inequality in developing Asia. Asian Development Bank Economics Working Paper Series, (426).
Zahonogo, P. (2017). Financial development and poverty in developing countries: evidence from Sub-Saharan Africa. International Journal of Economics and Finance, 9 (1): 211-220.
Zhang, Q., & Chen, R. (2015). Financial development and income inequality in China: An application of SVAR approach. Procedia Computer Science, 55, 774-781.
Abdin, J. (2016). Financial development and poverty reduction: Exploring the links between the issues using evidence from Bangladesh. International Journal of Financial Research, 7 (4), 44-65.
Ahmed, A. R., & Masih, M. (2017). What is the link between financial development and income inequality? evidence from Malaysia. ‏
Levine, R. (2008). Finance and the Poor. The Manchester School, 76, 1-13.
Beck, T., Demirgüç-Kunt, A., & Levine, R. (2007). Finance, inequality and the poor. Journal of economic growth, 12 (1), 27-49.
Caprio, G., & Honohan, P. (2001). Finance for growth: policy choices in a volatile world. The World Bank.
Beck, T., & Demirguc-Kunt, A. (2009). Financial institutions and markets across countries and over time-data and analysis. The World Bank.
Aghion, P., & Howitt, P. (1990). A model of growth through creative destruction (No. w3223). National Bureau of Economic Research.
Claessens, S., & Feijen, E. (2007). Financial sector development and the millennium development goals. The World Bank.‏
Jeanneney, S. G., & Kpodar, K. (2011). Financial development and poverty reduction: can there be a benefit without a Cost?. The Journal of development studies, 47 (1), 143-163.
Neaime, S., & Gaysset, I. (2018). Financial inclusion and stability in MENA: Evidence from poverty and inequality. Finance Research Letters, 24, 230-237.‏
Donou-Adonsou, F., & Sylwester, K. (2016). Financial development and poverty reduction in developing countries: New evidence from banks and microfinance institutions. Review of Development Finance, 6 (1): 82-90.‏
Rewilak, J. (2017). The role of financial development in poverty reduction. Review of development finance, 7 (2), 169 -176.‏
Alomar, I. (2009). Ability of financial system to reduce poverty. Research Center, College of Business and economics, Qassim university, Saudi Arabia No. 75.
Jalilian, H., & Kirkpatrick, C. (2002). Financial development and poverty reduction in developing countries. International journal of finance & economics, 7 (2), 97-108.‏
Okoye, L. U., Erin, O., & Modebe, N. J. (2017). Financial Inclusion as a Strategy for Enhanced Economic Growth and Development. The Journal of Internet Banking and Commerce, 1-14.
Gujarati, D. (2004). Basic Econometrics McGraw–Hill Book Co. New York, 387.‏
Pesaran, M. H., & Shin, Y. (1998). An autoregressive distributed-lag modelling approach to cointegration analysis. EconometricSociety Monographs, 31, 371-413.‏
Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16 (3), 289-326.‏
Mohamed, R.(2019). Determinants of Financial Inclusion in the Arab World, Egypt Al-Moa'serah Journal Magazine, 110 (533), The Egyptian Association for Political Economy, Statistics and Legislation, Egypt.
Browse journals by subject