Analysing the effect of financial inclusion on income inequality in Namibia
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Date
2024
Authors
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Journal ISSN
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Publisher
University of Namibia
Abstract
While there is growing evidence on the effect of financial inclusion on household income
and well-being, much is not known about the distributional effects across the different
income quintiles. This study contributes to the literature by examining the effect of
financial inclusion on household well-being and income inequality in Namibia, using
the 2017 nationally representative household financial inclusion survey. Household
per capita income and household asset index were created using the UNDP approach
and considered as proxies for household income and well-being respectively. Financial
inclusion is proxied by access and use of formal bank accounts, savings, and credit
accounts. The study employed a two-stage least squares (2SLS) regression to estimate
the effect of financial inclusion on household well-being and a quantile regression to
investigate to estimate the effect of financial inclusion on income inequality. The study
elicits some interesting results. First, the study finds that financial inclusion has a
positive and significant effect on household income and well-being. Second, the
magnitude of the effects was found to vary between rural and urban households with
effects generally higher among urban than rural households. Third, financial inclusion
was found to have a positive and significant effect across all quantiles of the income
distribution, with greater effects in the higher quantiles when access to formal credit
is considered and greater effects in the lower quintiles when access to formal banks
and savings accounts is considered. Finally, the study finds that household
socioeconomic characteristics such as education and gender of the household head,
urban residence, and household size are important determinants of household income
and well-being. The study recommends that national and international agencies
continue improving access to formal financial services to narrow the gap between the
wealthy and the poor, primarily in rural areas and low-income quintile households
Description
Thesis submitted in partial fulfilment of the requirements for the degree of master of science in economics
Keywords
Financial inclusion, Income inequality, Well-being, Namibia