Financial inclusion as a pathway to welfare enhancement and income equality: Micro-level evidence from Nigeria

Figures & data

Table 1. Variables used for constructing financial inclusion.

Component (weight)	Indicators (weight)	Included if
Microcredit (1/4)	Agro-credit (1/8)	Household accesses agricultural loan
	Other credit (1/8)	Household benefits from other forms of empowerment loans
Demand deposit (1/4)	Savings account (1/8)	Household owns a saving account
	Current account (1/8)	Household uses transaction account
Insurance (1/4)	Micro-insurance (1/4)	Household is insured
Time deposit (1/4)	Fixed account (1/4)	Household invests in a time deposit account

Table 2. Variables used for constructing a well-being index.

Component (weight)	Sub-component (weight)	Indicators (weight)	Measurement
Housing (1/3)	Basic household assets (1/6)	Owned electronics (1/24)	1 = yes; 0 = otherwise
		Furnished (1/24)	1 = yes; 0 = otherwise
		Has electricity (1/24)	1 = yes; 0 = otherwise
		Has separate living room (1/24)	1 = yes; 0 = otherwise
	Sanitation (1/6)	Household-specific access to safe drinking water (1/24)	1 = yes; 0 = otherwise
		Household-specific access to kitchen (1/24)	1 = yes; 0 = otherwise
		Household-specific access to latrine (1/24)	1 = yes; 0 = otherwise
		Has first aid box (1/24)	1 = yes; 0 = otherwise
Consumption expenditure (1/3)	Food consumption (1/6)	Average weekly food expenditure (1/6)	Converted from Nigerian Naira to USD
	Medical expenditure (1/6)	Average weekly medical expenditure (1/6)	Valued in USD
Wealth (1/3)	Savings (1/6)	Cash and formal savings (1/12)	Valued in USD
		Livestock (1/12)	Total livestock unit per capita (USD)
	Other assets (1/6)	Landed assets (non-farm) (1/12)	Valued in USD
		Acres of farm (1/12)	Valued in USD

Table 3. Descriptive statistics of households surveyed.

Variables	Overall	Financially included	Financially excluded	t-value
Gender (1 = male) (µ)	0.679	0.277	0.723	−13.982**
Age (µ)	42.510	41.321	43.584	−1.630
Household size (µ)	12.163	10.442	13.643	−8.543**
Literacy (µ)	2.773	3.011	2.329	4.732**
Per capita expenditure (µ)	2.504	2.601	2.454	3.442**
Well-being score	0.412	0.583	0.387	6.221**
Financial inclusion (µ)	0.276	1.000	0.000	–
N	1 750	483	1 276

**denotes significance at the 0.01 level.

Table 4. Determinants of household welfare.

Variables	Per capita expenditure (log)						Well-being index
	Model (1)		Model (1a)		Model (1b)		Model (2)		Model (2a)		Model (2b)
	Coef.	Std. error	Coef.	Std. error	Coef.	Std. error	Coef.	Std. error	Coef.	Std. error	Coef.	Std. error
FI			0.541**	0.051					0.311**	0.099
Household’s income	0.327**	0.120	0.423**	0.083	0.641**	0.121	0.453**	0.072	0.443**	0.072	0.238*	0.115
Household’s age	0.228**	0.084	0.319*	0.128	0.153**	0.028	0.214**	0.082	0.201**	0.025	0.120	0.125
Household’s gender	−0.126	0.156	−0.161*	0.072	−0.115*	0.022	−0.204**	0.048	−0.211**	0.055	−0.098	0.063
Household size	0.212**	0.042	0.383**	0.064	−0.149**	0.044	−0.250**	0.062	0.410**	0.084	−0.212**	0.074
Literacy	0.433*	0.195	0.488**	0.057	0.302**	0.031	0.511**	0.074	0.308**	0.062	0.451**	0.042
R^2	0.41		0.39		0.35		0.45		0.42		0.36
N	1750		483		1276		1682		463		1219

Notes: Models (1) and (2) are overall models, using consumption expenditure and composite welfare index, respectively. Similarly, Models (1a) and (2a) were computed with data on financially included households, while Models (1b) and (2b) estimate the coefficients of financially excluded households.

* and ** denote significance at the 0.05 and 0.01 levels, respectively.

Table 5. Estimate of the welfare differences between financially included and deprived households.

	Dependent variable: Per capita expenditure (log)			Within group diff.
Status	Q_10	Q_50	Q_90	Q_50–Q_10	Q_90–Q_50
Financially included	0.093** (4.39)	0.342** (5.61)	0.437** (4.11)	0.249	0.096
Financially deprived	0.032** (4.10)	0.094** (5.45)	0.243* (2.12)	0.062	0.149
Between group diff.	0.061	0.248	0.194
	Dependent variable: Well-being index
Financially included	0.061* (2.25)	0.193** (5.23)	0.272** (4.47)	0.132	0.079
Financially deprived	0.058** (4.34)	0.140** (3.51)	0.180** (5.41)	0.082	0.040
Between group diff.	0.003	0.053	0.092

* and ** denote significance at the 0.05 and 0.01 levels, respectively. t-values are between parentheses.

Table 6. Paths to welfare enhancement.

	Dependent variable: Per capita expenditure (log)
	Financially included					Financially deprived
				Within group diff.					Within group diff.
Activities	Q_10	Q_50	Q_90	Q_50–Q_10	Q_90–Q_50	Q_10	Q_50	Q_90	Q_50–Q_10	Q_90–Q_50
Profit from own business	0.453** (5.39)	0.385** (5.14)	0.271** (3.64)	−0.068	−0.114	0.156** (4.31)	0.262** (5.43)	0.283** (4.63)	0.106	0.021
Off-farm wages	0.032* (2.10)	0.201** (6.83)	0.387** (4.21)	0.169	0.186	0.051** (3.83)	0.152** (3.34)	0.189* (2.12)	0.101	0.037
Farm wages	−0.341** (−4.15)	0.121** (6.22)	0.050** (5.20)	0.462	−0.071	0.021** (3.23)	0.094** (5.23)	0.117** (5.13)	0.073	0.023
Earnings from crop production	0.314** (5.62)	0.182** (5.51)	0.081** (5.12)	−0.132	0.101	0.154** (5.51)	0.162** (5.11)	0.271** (6.43)	0.008	0.109
Earnings from livestock rearing	−0.091** (−3.15)	−0.108 (−1.51)	−0.122* (−2.23)	−0.017	−0.014	0.008 (1.21)	−0.018* (−1.98)	−0.091* (−2.16)	−0.026	−0.073
Environmental resource extraction	0.361** (4.74)	0.263** (5.23)	0.185* (2.23)	−0.098	−0.078	0.251** (5.23)	0.234** (5.41)	0.211** (7.56)	−0.017	−0.023
Area_dummy	−0.213** (−3.54)	−0.164* (−2.11)	−0.180* (−2.32)	0.049	−0.016	−0.142* (−2.13)	−0.148** (−3.23)	−0.151** (−3.56)	−0.006	−0.003
R^2	33	35	32			33	34	34
Dependent variable: Well-being index
Profit from own business	0.321** (4.72)	0.261** (3.55)	0.352** (5.14)	−0.068	0.091	0.085** (3.14)	0.162** (5.12)	0.173** (3.61)	0.077	0.011
Off-farm wages	0.096** (5.11)	0.151** (3.61)	0.184** (3.24)	0.055	0.033	0.062** (3.83)	0.092* (2.13)	0.159** (3.52)	0.03	0.067
Farm wages	−0.144** (−5.14)	−0.133** (−4.12)	0.082** (3.54)	0.011	0.215	0.021** (6.22)	0.080** (5.23)	0.102** (4.16)	0.059	0.022
Earnings from crop production	0.202** (3.21)	0.152** (4.81)	0.111* (2.12)	−0.050	−0.041	0.082** (3.51)	0.102** (6.16)	0.151** (4.44)	0.002	0.049
Earnings from livestock rearing	−0.032** (−4.27)	−0.074* (−2.11)	−0.092** (−4.32)	−0.042	−0.018	−0.048** (−4.51)	−0.083** (−3.43)	−0.098** (−4.64)	−0.035	−0.015
Environmental resource extraction	0.183* (2.12)	0.141** (4.31)	0.102** (4.21)	−0.042	−0.039	0.063** (5.23)	0.082** (3.41)	0.091** (4.56)	0.019	0.009
Area_dummy	−0.206** (−4.41)	−0.208** (−3.18)	−0.212* (−2.12)	−0.002	−0.004	−0.142** (−6.22)	−0.142* (−2.11)	−0.125** (−4.75)	0.000	0.017
R^2	31	30	30			32	32	30

* and ** denote significance at the 0.05 and 0.01 levels, respectively. t-values are between parentheses.

Table 7. Household income, financial inclusion, and welfare.

	Dependent variable: Per capita income (log)
Variables	OLS	Q_10	Q_20	Q_30	Q_40	Q_50	Q_60	Q_70	Q_80	Q_90
Well-being index	0.443** (6.21)	0.026* (2.13)	0.047** (6.53)	0.062* (2.50)	0.083** (6.48)	0.113** (5.82)	0.132** (4.32)	0.140** (5.53)	0.202** (6.31)	0.261** (8.23)
FI	0.311** (4.82)	0.105** (5.41)	0.143** (6.15)	0.210** (4.52)	0.240** (6.43)	0.272** (4.31)	0.285** (4.73)	0.301** (3.52)	0.308** (5.53)	0.310** (4.21)
Household age	0.210* (3.82)	0.214** (3.35)	0.180** (4.12)	0.162** (4.82)	0.140* (2.12)	0.123 (1.27)	0.105** (5.23)	0.098** (4.16)	0.072 (1.15)	0.053 (1.20)
Household gender	−0.135** (−4.23)	−0.182** (−4.62)	−0.173** (−5.41)	−0.156** (−6.42)	−0.142** (−4.40)	−0.131** (−3.52)	−0.122** (−5.41)	−0.114* (−2.41)	−0.094* (−2.25)	−0.081** (−5.11)
Household size	0.224** (5.51)	0.241** (5.15)	0.239** (3.23)	0.227** (4.41)	0.213* (2.19)	0.183* (2.11)	0.163 (1.43)	0.148 (1.51)	0.131* (2.23)	0.120 (1.21)
Literacy	0.412** (4.13)	0.161** (4.41)	0.180** (3.22)	0.185** (5.03)	0.202** (4.14)	0.243* (2.23)	0.264* (2.14)	0.282** (4.56)	0.308** (5.53)	0.356* (2.21)
Area_dummy	−0.301** (−3.12)	−0.183** (−5.51)	−0.173** (−3.32)	−0.163** (−4.23)	−0.160** (−5.24)	−0.152** (−4.10)	−0.144* (−2.21)	−0.135** (−5.16)	−0.122** (−3.45)	−0.111** (−4.18)
R^2	0.43	0.35	0.35	0.34	0.36	0.34	0.35	0.36	0.34	0.36
N		483

* and ** denote significance at the 0.05 and 0.01 levels, respectively. t-values are between parentheses.

Table 8. Propensity score matching.

Estimator	Baseline result	Matching methods
	OLS	Nearest neighbour	Radius	Stratification	Kernel	Local linear regression
FI	0.311** (0.063)	0.317** (0.083)	0.331** (0.076)	0.321** (0.083)	0.347** (0.068)	0.325** (0.062)
Well-being index	0.443** (0.082)	0.451** (0.091)	0.442** (0.065)	0.434** (0.057)	0.423** (0.047)	0.441** (0.064)

** denotes significance at the 0.01 level. Standard errors are between parentheses.

Table 9. Counterfactual decomposition.

	Q_10	Q_20	Q_30	Q_40	Q_50	Q_60	Q_70	Q_80	Q_90
Coefficient effect	68.54	66.21	64.75	55.01	47.83	46.11	48.15	51.31	51.88
Characteristics effect	31.46	33.79	35.25	44.99	52.17	53.89	51.85	48.69	48.12
Total	100

Note: Q_10 to Q_90 indicate quantiles from 10 to 90.