Digital Finance Technology and Its Association With Poverty: A Micro-Level Analysis

Due to the high levels of informal employment and the location bias of banks towards urban areas, access to traditional financial services (formal banks) is limited in many countries in the Global South. Digital finance technology can improve welfare and reduce income inequality by promoting access to financial services for the excluded population. This chapter analyses the association between digital finance technology and income poverty in selected Southern African countries based on cross- sectional data from the World Bank. Two proxies of digital finance technology (sending or receiving digital payments and use of mobile money services to pay bills or to send or receive money) were the main regressors, while the within- economy household income quintile (transformed to a binary variable) was the regressand. The logistic regression results showed that digital finance technology was negatively related to poverty. Therefore, promoting digital finance technology enhances income growth and alleviates poverty in the region.