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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. 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.
    3. 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.
    4. 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.
    5. Simplice Asongu & Nicholas Odhiambo, 2017. "Mobile banking usage, quality of growth, inequality and poverty in developing countries," Working Papers of the African Governance and Development Institute. 17/046, African Governance and Development Institute..
    6. 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.
    7. 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.
    8. 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).
    9. Simplice A. Asongu, 2019. "Financial Access and Productivity Dynamics in Sub-Saharan Africa," Working Papers 19/052, European Xtramile Centre of African Studies (EXCAS).
    10. 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.
    11. 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.
    12. 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.
    13. Simplice Asongu & Jacinta C. Nwachukwu, 2017. "Recent finance advances in information technology for inclusive development: a survey," Working Papers of the African Governance and Development Institute. 17/009, African Governance and Development Institute..
    14. Asongu, Simplice & Asongu, Ndemaze, 2017. "Comparative Determinants of Quality of Growth in Developing Countries," MPRA Paper 80650, University Library of Munich, Germany.
    15. 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.
    16. 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).
    17. 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.
    18. Salah Abosedra & Muhammad Shahbaz & Kishwar Nawaz, 2016. "Modeling Causality Between Financial Deepening and Poverty Reduction in Egypt," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 126(3), pages 955-969, April.
    19. 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.

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