Is financial inclusion a catalist for poverty reduction in Rwanda? Evidence from the fifth integrated household living condition survey (EICV5) data

Abstract

As a pillar tool used for development the role of financial inclusion (FI) on poverty reduction at the household level in Rwanda remain unknown. This study contribution is to assess the role that plays financial inclusion using the fifth Enquête Intégrale sur les Conditions de Vie des ménages /Household and living condition survey (EICV5) data. This is a significant problem for Rwanda as a developing country, even though it has achieved rapid financial development. Primary data collected from 14,580 sampled households in the EICV5 (October 2016 to October 2017) was used to perform descriptive statistics and correlation among used variables. Empirical analysis was also used on two models: Binary Regression Model to determine the effect of FI on the second review of household Ubudehe category and the Multiple Linear Regression Models to determine the impact on FI on Welfare category due to household consumption. The obtained results showed that 54.2 percent of households own a saving account, 65.8 percent of them tried to obtain a loan and that 72.6 percent used telephone to transfer money in or out. In addition, the study showed enough evidence to confirm that in both models, penetration of financial inclusion is a catalyst for poverty alleviation in Rwanda; whereas accessibility, penetration and usage of financial inclusion by households are a catalyst for poverty reduction in Rwanda when residence and gender of household head are factored in the welfare category.