Is Financial Inclusion Effective in Eradicating Poverty?

Abstract

This paper examines the relationship between financial inclusion and poverty in Uganda taking into account the effect of social intermediation and financial literacy. We employed a cross-sectional study design in rural western Uganda among 310 clients of Microfinance. Households of married people were more financially included and hence they were able to reduce their poverty status, Social intermediation was positively linked to financial inclusion, a positive link between financial literacy and financial inclusion was established. Education level and Financial Literacy does not have a significant positive effect on Financial Inclusion and Education interacts with Social Intermediation to positively influence the Financial Inclusion. Policies should emphasize the social aspects in the society to derive financial inclusion and hence tackle poverty. The study contributes to the existing research in the area of financial inclusion and enables future researchers to have a wide research base. The theoretical contribution is that we were able to integrate the theory of human capital in explaining financial inclusion from a developing country perspective.