Cross-country regressions conducted by Aslan and
others (2017) concluded that financial inclusion was linked to income
inequality. The study analyzed the impact of inequality (with gender
restriction) in access to finance on income inequality. The impact of financial
development on poverty and inequality was examined by the current studies. However,
there were no cross country analysis which looked into financial inclusion and
income inequality. The authors particularly analyzed sub-Saharan Africa, where
both gender and income inequality persists more compared to other regions. The
authors utilized the Findex database to construct an index of financial
inclusion. The author’s conclusion was that at the country level, unequal
financial access was significantly related to the higher income inequality. The
authors used the 2011 data for the empirical analysis given that income
inequality data are only available till 2013 with a lag.  They constructed indices for both 2011 and
2014.

 

Although the theory points out to a link between
financial access and income inequality, the literature has primarily examined
the relationship between financial depth and income inequality. While the
theory is disconcerted on the course of causality between financial development
and income inequality, empirical studies demonstrated significant impact of
financial development on income inequality. 
Beck, Demirguc Kunt and Levine (2007) concluded that financial
development disproportionately enhances the income of the poor and decreases
income inequality.  According to their findings,
financial reforms which aim at diminishing market frictions can increase growth
without distorting redistributive policies. Covering a panel data analysis of
22 sub-Saharan African countries for the years from 1999 to 2004, Batuo and et
al. (2010) found that income inequality decreases, as the countries develop
their financial sector.

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