Financial Access Expansion and Rural-Urban Welfare Disparities: Evidence from Zambia - Research Paper

This paper investigates the welfare gains following changes in aggregate financial access. Using individual-level data collected in Zambia between 2009 and 2015, results show that increasing the number of financial access points improved the quality of life by moving users of financial services by 1.2 percentage points especially in rural areas. A monetary measure of welfare shows an overall increase in incomes by 10 percentage points over the seven-year period for urban dwellers, moving the urban poor above the income-poverty line in Zambia. Financial resources, exchanged through financial services providers located closer to users, were used to acquire and/or improve the quality of homes including the use of better cooking technologies. This choice of investment in dwellings, points to a long-term outlook in the financial decisions taken by the financially included, with prospects for sustainable development. These results highlight the need to intensify financial expansion policies that target the rural areas in the fight against poverty.