Is financial development associated with poverty reduction in the West Africa region?

Details

Supervisors

Panin, Amma

Faculty

Faculté des sciences économiques, sociales, politiques et de communication

Degree label

Master [120] en sciences économiques, orientation générale, à finalité spécialisée

Abstract

This thesis investigates whether financial development is associated with poverty reduction in the West African region. Using fixed-effect and two-stages least squares (2SLS) econometric techniques to overcome the endogeneity issues by using rule of law and institutional stability as instruments, and measuring financial development with financial depth and financial inclusion indicators while taking into account income per capita and income distribution inequality, results indicate a negative association between financial development and poverty, and a positive association between financial development and income of the 10 percent poorest in the West African region. Furthermore, the findings indicate that the channels through which financial development contributes to poverty reduction in the West Africa region are through its ability to supply transaction services and saving opportunities; its ability to provide physical access to financial services to the poor; and also its capacity to improve the income of the poorest. No evidence was found regarding the contribution of financial development to poverty as a result of credit supply to the private sector. I believe this study is relevant because although financial institutions have increased in number in the region, a large part of the population is still not benefiting from the system and a significant part of the population in the region is still living under the poverty line. Thus, these findings contribute to our understanding of how financial development can be used to reduce poverty in the region.