Does Availability of Banking Services Influence Income Inequality? : Evidence from Developing Economies of Asia Pacific

This study aims to observe the impact of financial inclusion from a micro perspective, availability of banking services, on income inequality. The analysis is carried out by using an annual panel data set constructed with a sample of eight developing countries of the Asia Pacific region for the period of 2005-2019. Hence, this study empirically estimates the impact of the availability of banking services on income inequality. A composite variable consisting of number of bank branches and number of automated teller machines is developed to measure the availability of banking services whereas income inequality is measured by the SWIID. The results show that greater availability of banking services robustly reduces income inequality across countries. Besides, the study generates evidence that greater women empowerment and better regulatory quality can reduce income inequality whereas urbanization and globalization can somewhat deteriorate the income equality at least in the short run. The central message of this study is in favor of further extending the formal banking services to the unbanked segments and females of the population as well as enhancing regulatory role with better policy measures in order to maximize the grand social welfare and ensure sustainable development