Impact of financial inclusion on poverty reduction in Asian economies

This study examines the impact of financial inclusion (FIC) on poverty reduction across selected Asian economies over the period 2000–2023. It highlights the importance of broader access to financial services in lowering poverty levels and employs the Cross-Sectional Autoregressive Distributed Lag (CS-ARDL) methodology. This technique is particularly suitable for addressing cross-sectional dependence, capturing both short- and long-term dynamics, and mitigating potential endogeneity concerns. The empirical findings indicate a significant inverse relationship between FIC and poverty, suggesting that greater financial access contributes to reduced poverty rates in the region. This effect can be explained through several mechanisms: enhanced FIC allows individuals to better manage financial risks, invest in critical human capital such as education and health, and engage in entrepreneurial activities. Inclusive financial systems strengthen economic resilience and provide marginalized populations with opportunities to accumulate savings, access credit, and acquire financial literacy. The results underscore the need for policymakers to focus on expanding financial service outreach to underserved groups, thereby promoting poverty alleviation (PVT) and fostering economic growth. The study contributes to the literature by applying the CS-ARDL framework to the financial inclusion–poverty nexus in Asian economies, uncovering heterogeneous effects between East and South Asia, and estimating an 18.7% annual speed of adjustment toward long-run equilibrium. These findings emphasize the sustained role of financial inclusion in poverty reduction and offer insights for integrating inclusive financial policies into broader national poverty strategies.