Financial Inclusion: Does it matter in Alleviating Poverty in Pakistan

Salman Mahmood (), Wen Shuhui (), Shoaib Aslam () and Tanveer Ahmed ()
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Salman Mahmood: Southwest Forestry University
Wen Shuhui: Kunming University of Science and Technology
Shoaib Aslam: The Islamia University of Bahawalpur
Tanveer Ahmed: Kunming University of Science and Technology

Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, 2023, vol. 169, issue 3, No 18, 1125-1146

Abstract: Abstract The world is currently transitioning from a paradigm of purely economic growth to one of inclusive growth. Financial inclusion (FI) as a driver of inclusive growth and poverty alleviation has attracted significant attention in this epochal transition. Although many excellent works have been published regarding advanced applications of FI and FI-poverty alleviation mechanisms, no work has been done to systematically discuss the interaction of financial literacy (FL) and the mediation of inclusive growth, particularly in Pakistan. Therefore, we examine how FI and the interaction of FI and FL explain their successful translation into inclusive growth and poverty alleviation. To better understand the mechanism, we examine SME perspectives in Pakistan using deductive and cross-sectional study designs and employ mediational and moderated mediational approaches through structural equation modeling technique in Amos 24. This is a significant oversight because small firms are often neglected when accessing financial services. Our findings show that, first, FI influences inclusive growth and poverty alleviation, respectively. Second, it demonstrated the inclusive growth mediation link between FI and poverty alleviation. Finally, FL strengthens the mediational link between FI, inclusive growth, and poverty alleviation. Yet, in the face of low FL, we also suggest that the FI will start to converge in ways that are problematic for a nation’s SME sector in promoting inclusive growth and poverty alleviation. This insight contributes to an important understanding of the efficacy of FI as an inclusive growth and poverty reduction tool.

Keywords: SMEs; Financial inclusion; Inclusive growth; Financial literacy; Poverty alleviation (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11205-023-03200-y

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