The effect of financial inclusion on household welfare
Date
2017-05-12
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Abstract
The Philippines has experienced remarkable economic growth over the last few
years, a growth that has not been felt by the vast majority of Filipinos. Discourse on the
role of the financial sector in promoting inclusive economic growth has gained
momentum in recent years, and the matter of financial inclusion has risen to prominence
among government policymakers and the private financial sector. In this study, I aimed to
determine the impact of financial inclusion, measured in terms of household expenditures
on financial services and incomes from the use of financials services, on household
welfare. I employed multiple econometric models, using expenditures on food, clothing,
rent and utilities, durable and non-durable household goods, health, transportation,
communication, recreation, education, and other goods and services as proxy indicators
for household welfare, and a set of conventional welfare indicators and the use of
different financial services among households as financial inclusion indicators.
I found that household expenditures on financial services and incomes from the
use of financial services increases different kinds of household expenditures, signifying
increases in household welfare in terms of food, clothing, rent and utilities, durable and
non-durable household goods, health, transportation, communications, recreation,
education, and other goods and services. Moreover, I proved empirically that the use of
financial services reduces the probability of household poverty, providing stronger
support to the assertion that financial inclusion improves household welfare.
Furthermore, I found empirical evidence that financially included households have higher
levels of expenditures than financially excluded households using treatment effects
estimation.
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Keywords
financial inclusion, poverty alleviation, household welfare, formal finance, treatment effects