Abstract

GUIZAR, Isaí; GONZALEZ-VEGA, Claudio  and  MIRANDA, Mario J.. A numerical analysis of financial inclusion and poverty. EconoQuantum [online]. 2015, vol.12, n.2, pp.7-24. ISSN 2007-9869.

Per se, financial inclusion cannot alleviate poverty, but efficient financial services (credit and deposits) facilitate the adoption of advanced production technologies, which generate higher expected incomes. We develop and solve dynamic, stochastic, infinite-horizon models that show that inclusion in the market for deposits (or loans) does not guarantee higher incomes for the poorest. We identify initial wealth levels (consumption thresholds), where households do not demand deposits (or do not reduce their indebtedness). Absence of demand for deposit facilities (or the use of credit for consumption smoothing only) does not allow financial inclusion to impact household incomes. Once the consumption threshold is reached, household wealth must still increase to reach the adoption threshold. During this transition, financial services are a tool for risk management. With enough wealth, at the adoption threshold, the accumulated deposit (or loan) is used for investment in advanced production technologies. This has implications for the design of financial inclusion policies for different target populations. Financial inclusion is necessary, but not sufficient, for poverty alleviation.

Keywords : Financial Inclusion; Credit; Deposits; Poverty; Technology Adoption.

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