Abstract:
Financial market imperfections such as information asymmetries, market segmentation,
and transaction costs hinder poor people's access to formal financial goods and services,
preventing them from escaping the poverty. UN Sustainable development goals
includes the alleviation of income inequality and poverty from the world till 2030 and
for the achievement of these goals financial inclusion is indispensable. Emergence of
financial technologies paved the ways for financial inclusion. The data of twenty-three
low and lower middle income countries for six years was used in this study. An index
of fintech based financial inclusion which measured the three dimensions of fintech
based financial inclusion such as supply (Access), demand (Usage) and overall access
and usage for twenty-three countries was also developed and its impact was examined
on poverty and income inequality by using the two step system gmm and fixed effect
technique. It has been found out that fintech based financial inclusion demand side
index (Usage) have negative impact on poverty. Whereas, Fintech based financial
inclusion supply side index (Access) have positive impact on poverty and income
inequality. Moreover, fintech based financial inclusion overall index has negative
impact on poverty when fixed effect method was used but have positive impact on
poverty when the two step system gmm was used. Furthermore, Fintech based financial
inclusion overall index have positive impact on income inequality. This implies that
fintech-based financial inclusion, rather than mitigating income inequality, exacerbates
it. The core rationale behind these findings lies in the understanding that income
inequality is a persistent, long-term issue that cannot be significantly reduced within a
short timeframe. This research sheds light on the nuanced effects of fintech-based
financial inclusion on poverty and income inequality, emphasizing the need for
comprehensive, long-term strategies to address these challenges
