Role of gender-based digital financial inclusion and women empowerment in poverty reduction: evidence from Asian countries

Abstract

The main aim of this study is to explore the role of gender-based digital financial inclusion (GDFI) and women empowerment in poverty reduction in Asian countries using a panel data set from 2011 to 2023. For this purpose, the GDFI index, consisting of various indicators, was constructed employing principal component analysis (PCA). It also uses econometric techniques like the cross-sectional dependence (CSD) test, second-generation unit root tests such as CADF and CIPS, and traditional cointegration tests such as Pedroni and Kao. Further, CS-ARDL, Feasible Generalized Least Square (FGLS) Driscoll–Kraay (DK) standard errors, and Pairwise Dumitrescu and Hurlin panel causality test were applied. It was found that gender-based DFI and women's empowerment have a significant role in poverty reduction. They both influence positively in increasing household consumption. Moreover, inflation in the economy negatively influences poverty reduction. Access to financial independence among women can enable them to improve their bargaining power in households. Access to banks can increase their access to capital and lead to entrepreneurial activities. Hence, it is creating a more inclusive and sustainable development society. Further, the causality test findings suggested a bi-directional causal relationship between GDFI and poverty reduction, female labour force participation (FLP) and poverty reduction, and a unidirectional relationship between inflation and poverty reduction. The findings imply that enhancing gender-based digital financial inclusion (GDFI) and women's empowerment can significantly contribute to poverty reduction by increasing household consumption and financial independence.