Financial inclusion and Poverty reduction

Abstract

Over time, it has been argued that economic growth is a powerful instrument for poverty reduction, the improvement of the standard of living and quality of life in developing countries. However, in recent times, increasing economic growth has not been influencing poverty reduction significantly and among other precarious development indicators, especially in developing countries. And with the growing number of extreme poverty resulting from lack of out-of-pocket among low-income households, this had prompted the principle of financial inclusion to become globally accepted due to poverty reduction role play in society. It is on this note that this chapter reviews the importance of financial inclusion on poverty reduction, the effect of financial exclusion on poor, financial education and how financial institutions can enhance financial inclusion to perform better poverty eradication roles. Thus, it concludes that financial inclusion provides a low-income household with affordable financial credit to jumpstart business which generates income to improve the living standard thus reducing poverty. It gives the household an opportunity to create values and use them to provide basic needs such as education, health, and nutrition. It also provides standby finance for health spending in case of health shocks through insurance and health savings accounts.