Financial Deepening, Property Rights and Poverty: Evidence From Sub-Saharan Africa

August 1, 2011

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Yifei Huang, and Raju J Singh. Financial Deepening, Property Rights and Poverty: Evidence From Sub-Saharan Africa, (USA: International Monetary Fund, 2011) accessed September 20, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Recent studies on the relationship between financial development and poverty have been inconclusive. Some claim that, by allowing more entrepreneurs to obtain financing, financial development improves the allocation of capital, which has a particularly large impact on the poor. Others argue that it is primarily the rich and politically connected who benefit from improvements in the financial system. This paper looks at a sample of 37 countries in sub-Saharan Africa from 1992 through 2006. Its results suggest that financial deepening could narrow income inequality and reduce poverty, and that stronger property rights reinforce these effects. Interest rate and lending liberalization alone could, however, be detrimental to the poor if not accompanied by institutional reforms, in particular stronger property rights and wider access to creditor information.

Subject: Credit, Financial markets, Financial sector development, Income distribution, Income inequality, Money, National accounts, Poverty

Keywords: Absolute value, Africa, Allocation mechanism, Credit, Decrease poverty, Dependent variable, Financial development, Financial sector development, GDP, Gini coefficient, Income distribution, Income inequality, Positive correlation, Poverty alleviation, Poverty gap, Poverty indicator, Sub-Saharan Africa, WP

Publication Details

Pages:

31
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2011/196
Stock No:

WPIEA2011196
ISBN:

9781462305230
ISSN:

1018-5941

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