Published on July 2020 | Financial deepening, Financial Efficiency, Income Distribution and Economic Growth

FINANCIAL DEEPENING, FINANCIAL EFFICIENCY, INTEREST RATE DEREGULATION AND POVERTY LEVELS: A CRITICAL LITERATURE REVIEW

The current paper sought to establish the research gap on the effect of financial deepening, financial efficiency and interest rate deregulation on poverty levels. The study had a number of key findings; first, there exist mixed findings on the effect of financial deepening on poverty level with some studies establishing negative effect while others finding positive effect. Secondly, most studies have established that financial efficiency has the capacity to reduce poverty levels greatly and finally most studies tend to suggest that interest rate deregulation has a significant moderating effect on the relationship between financial deepening and Poverty levels; however, the sign of the effect was not conclusive. The study has a number of recommendations. Firstly, study suggest that ministry policy experts should ensure financial efficiency that aids in poverty eradication by coming up with policy paper that ensures financial efficiency in both the capital market and the banking sector. Secondly, the study recommend that management of financial institutions should come up with strategies of improving financial deepening by aggressively marketing financial products. The management of financial institutions should for instance develop products that are targeted at the low-income earners like micro lending to encourage financial reach in the society.