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Is financial development pro-poor or pro-rich? Empirical evidence from Tanzania

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  • Nicholas M. Odhiambo

Abstract

This paper examines the dynamic causal relationship between financial development and poverty reduction in Tanzania. The study attempts to answer one critical question: does financial development Granger-cause poverty reduction in Tanzania? In other words, does the financial development that has been experienced in Tanzania - ever since the onset of financial reforms in the 1990s - trickle down to the poor? Unlike some previous studies, we employ the recently developed autoregressive distributed lag (ARDL)-bounds testing approach to examine this linkage. In addition, we incorporate savings as an intermittent variable between financial development and poverty reduction in a trivariate setting. Our results show that there is an overwhelming long-run unidirectional causal flow from financial development to poverty reduction in Tanzania. This finding has important policy implications, as it shows that financial development trickles down to the poor in Tanzania.

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  • Nicholas M. Odhiambo, 2013. "Is financial development pro-poor or pro-rich? Empirical evidence from Tanzania," Journal of Development Effectiveness, Taylor & Francis Journals, vol. 5(4), pages 489-500, December.
  • Handle: RePEc:taf:jdevef:v:5:y:2013:i:4:p:489-500
    DOI: 10.1080/19439342.2013.866154
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    1. Peter Quartey, 2005. "Financial Sector Development, Savings Mobilization and Poverty Reduction in Ghana," WIDER Working Paper Series RP2005-71, World Institute for Development Economic Research (UNU-WIDER).
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    1. Simplice A. Asongu & Nicholas M. Odhiambo, 2020. "The Mobile Phone, Information Sharing, and Financial Sector Development in Africa: a Quantile Regression Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(3), pages 1234-1269, September.
    2. Acheampong, Alex O. & Appiah-Otoo, Isaac & Dzator, Janet & Agyemang, Kwabena Koforobour, 2021. "Remittances, financial development and poverty reduction in Sub-Saharan Africa: Implications for post-COVID-19 macroeconomic policies," Journal of Policy Modeling, Elsevier, vol. 43(6), pages 1365-1387.
    3. Simplice Asongu & Nicholas M. Odhiambo, 2020. "Financial access, governance and insurance sector development in sub-Saharan Africa," Journal of Economic Studies, Emerald Group Publishing, vol. 47(4), pages 849-875, February.
    4. Tchamyou, Vanessa S. & Erreygers, Guido & Cassimon, Danny, 2019. "Inequality, ICT and financial access in Africa," Technological Forecasting and Social Change, Elsevier, vol. 139(C), pages 169-184.
    5. Simplice A. Asongu & Jacinta C. Nwachukwu, 2018. "Recent finance advances in information technology for inclusive development: a systematic review," Netnomics, Springer, vol. 19(1), pages 65-93, October.
    6. Asongu, Simplice A. & Odhiambo, Nicholas M., 2017. "Mobile banking usage, quality of growth, inequality and poverty in developing countries," Working Papers 23396, University of South Africa, Department of Economics.
    7. Simplice A. Asongu & Nicholas M. Odhiambo, 2018. "ICT, Financial Access and Gender Inclusion in the Formal Economic Sector: Evidence from Africa," The African Finance Journal, Africagrowth Institute, vol. 20(2), pages 45-65.
    8. Asongu, Simplice A. & Nwachukwu, Jacinta C., 2017. "Quality of Growth Empirics: Comparative gaps, benchmarking and policy syndromes," Journal of Policy Modeling, Elsevier, vol. 39(5), pages 861-882.
    9. Simplice A. Asongu & Nicholas M. Odhiambo, 2020. "Finance, Governance and Inclusive Education in Sub-Saharan Africa," Working Papers of The Association for Promoting Women in Research and Development in Africa (ASPROWORDA). 20/007, The Association for Promoting Women in Research and Development in Africa (ASPROWORDA).
    10. Simplice Asongu, 2019. "Financial Access and Productivity Dynamics in Sub-Saharan Africa," Working Papers of the African Governance and Development Institute. 19/052, African Governance and Development Institute..
    11. Simplice Asongu & Ndemaze Asongu, 2018. "The comparative exploration of mobile money services in inclusive development," International Journal of Social Economics, Emerald Group Publishing, vol. 45(1), pages 124-139, January.
    12. Simplice A. Asongu & Jules R. Minkoua N., 2018. "Dynamic openness and finance in Africa," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(4), pages 409-430, May.
    13. Asongu, Simplice A. & Nnanna, Joseph & Acha-Anyi, Paul N., 2020. "Finance, inequality and inclusive education in Sub-Saharan Africa," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 162-177.
    14. Simplice A. Asongu & Jacinta C. Nwachukwu, 2017. "Recent finance advances in information technology for inclusive development: a survey," Research Africa Network Working Papers 17/009, Research Africa Network (RAN).
    15. Nicholas M. Odhiambo, "undated". "Health Expenditure and Economic Growth in sub-Saharan Africa: An Empirical Investigation," Working Papers AESRIWP05, African Economic and Social Research Institute (AESRI).
    16. Simplice Asongu & Ndemaze Asongu, 2017. "Comparative Determinants of Quality of Growth in Developing Countries," Working Papers of the African Governance and Development Institute. 17/013, African Governance and Development Institute..
    17. Asongu, Simplice A. & Nnanna, Joseph & Acha-Anyi, Paul N., 2020. "Inequality and gender economic inclusion: The moderating role of financial access in Sub-Saharan Africa," Economic Analysis and Policy, Elsevier, vol. 65(C), pages 173-185.
    18. Simplice A. Asongu & Joseph Nnanna & Paul N. Acha-Anyi, 2020. "Inclusive Education for Inclusive Economic Participation: the Financial Access Channel," Research Africa Network Working Papers 20/019, Research Africa Network (RAN).
    19. Kazeem B. Ajide & Olorunfemi Y. Alimi & Simplice A. Asongu, 2019. "Ethnic Diversity and Inequality in Sub-Saharan Africa: Do Institutions Reduce the Noise?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 145(3), pages 1033-1062, October.
    20. Sheilla Nyasha & Nicholas M. Odhiambo, "undated". "The Impact of Remittances on Economic Growth: Empirical Evidence from South Africa," Working Papers AESRIWP21, African Economic and Social Research Institute (AESRI).
    21. Vanessa Simen Tchamyou, 2020. "Education, lifelong learning, inequality and financial access: evidence from African countries," Contemporary Social Science, Taylor & Francis Journals, vol. 15(1), pages 7-25, January.
    22. Abosedra, Salah & Shahbaz, Muhammad & Nawaz, Kishwar, 2015. "Modeling Causality between Financial Deepening and Poverty Reduction in Egypt," MPRA Paper 67166, University Library of Munich, Germany, revised 09 Oct 2015.
    23. repec:eme:srj000:srj-02-2020-0039 is not listed on IDEAS
    24. Simplice A. Asongu & Nicholas M. Odhiambo, 2022. "Financial Access and Value Added in Sub-Saharan Africa: Empirical Evidence from the Agricultural, Manufacturing and Service Sectors," Working Papers 22/009, European Xtramile Centre of African Studies (EXCAS).

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