The Contribution of Formal and Non-formal Finance to Household Welfare: Evidence from South Africa

Lwanga Elizabeth Nanziri

No 2018-06, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: Access to finance has been identified as a tool in the fight against poverty and inequality. While efforts have been made to ensure that affordable formal financial services are accessible, the use of alternative non-formal mechanisms persists in many developing economies and thus compromises the potential gains from financial inclusion. Using a dataset from the FinScope surveys on South Africa, this paper investigates whether welfare outcomes of users of formal financial services and users of alternative non-formal financial services differ. Results, based on panel and treatment effect techniques show that the use of formal and semi-formal financial services leads to positive and significant welfare outcomes which are measured using an asset and well-being index. While these positive outcomes persist beyond the immediate period following the use of formal financial services, there is no such effect when one uses non-formal financial services. An attempt is made to contextualise these results for financial inclusion.

Keywords: Financial Inclusion; Recentered Influence Function; Social Grants; South Africa; Welfare (search for similar items in EconPapers)
JEL-codes: G2 I3 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-dev, nep-fdg, nep-fle and nep-mfd
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:csa:wpaper:2018-06

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