Financial Development and Poverty Reduction: Can There Be a Benefit Without a Cost?

Author/Editor:

Sylviane Guillaumont Jeanneney ; Kangni R Kpodar

Publication Date:

March 1, 2008

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This article investigates how financial development helps to reduce poverty directly through the McKinnon conduit effect and indirectly through economic growth. The results obtained with data for a sample of developing countries from 1966 through 2000 suggest that the poor benefit from the ability of the banking system to facilitate transactions and provide savings opportunities but to some extent fail to reap the benefit from greater availability of credit. Moreover, financial development is accompanied by financial instability, which is detrimental to the poor. Nevertheless, the benefits of financial development for the poor outweigh the cost.

Series:

Working Paper No. 2008/062

Subject:

Credit Financial sector development Personal income Poverty Poverty measurement

English

Publication Date:

March 1, 2008

ISBN/ISSN:

9781451869248/1018-5941

Stock No:

WPIEA2008062

Pages:

36

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