“Financial Inclusion Reduces Inequality and Poverty”: Myth or Reality?

The Sustainable Development Goals (SDGs) have been developed with a view to enhancing the quality of life in both developed and developing nations. Financial inclusion (SDG 8.10) emphasizes the need for capacity building of domestic financial institutions to provide widespread access to financial services. This chapter investigates the impact of financial inclusion on poverty alleviation, income inequality and non-income dimensions of inequality, namely malnourishment, health, and education. Panel data regression analysis was carried out for 138 developed and developing countries spanning a period of 9 years from 2010 to 2018. Accordingly, changes within countries and across countries were captured over this period of time. Our results indicate that financial inclusion as measured by the Financial Inclusion Index has a strong negative association with poverty but not with the other SDGs that were tested. Therefore, it seems reasonable to conclude that this has ramifications for policy design and implementation. The main contribution of this chapter is that it confirms the significance of developing conducive financial services that, in turn, provide equal opportunities, irrespective of gender, religion, and ethnicity. However, it also highlights that financial inclusion, though necessary, may not be sufficient in the quest to achieve the SDGs.