Investigating the Link between Financial Development and Poverty Reduction in Pakistan through Financial Inclusion

Abstract

The goal of this study is to determine how financial inclusion and development have affected Pakistan's efforts to reduce poverty. The ARDL method is used to analyze time series data from 2000 to 2020. To measure financial inclusion, the study constructs an index using the number of depositors, financial institutions, ATMs, and borrowers. The credit to the private sector as a percentage of GDP is used to measure financial development, while inflation and real interest rate are included as additional variables. The findings of the study indicate that both financial inclusion and development have a significant effect on reducing poverty. In addition, the results show that inflation and real interest rate have a positive relationship with poverty. These findings suggest that the availability of financial services can lead to poverty reduction and overall societal welfare.