ABSTRACT

Several studies investigated the impact of financial development on poverty and find out that it may lower down the poverty level of the country. In the current study we investigate the relationship of financial development and poverty in other way around that poverty can also be a factor that can affect the development of financial sectors. The main aim of the study is to find the impact of poverty on financial development along with taking in consideration the moderating role of ICT and trade openness. This analysis is carried out for selected South Asian countries i.e., Pakistan, India, Bangladesh, Sri Lanka, and Nepal, from 1984-2020. In the study, we used the panel ARDL to determine the impact of poverty on financial development. Secondly, we checked for the moderating role of trade openness and Information and Communication Technology (ICT) on poverty and financial development. Finally, we checked for the Asymmetric effect of poverty, trade openness, and ICT on financial development by applying Nonlinear ARDL. Results have shown that higher poverty rates undermine the development of the financial sector. Significantly, higher poverty rates undermine the expansion of the financial sector in the context of lower levels of trade openness and ICT. Thus, greater trade openness and ICT help mitigate poverty’s negative financial development effect. From the result, we also find that poverty, trade openness, and ICT have asymmetric impacts on poverty and financial development.