Does access to formal finance matter for welfare and inequality? Micro level evidence from Nigeria

Olabimtan Adebowale and Dr Ralitza Dimova


Using a treatment effects model, decomposition techniques and representative household data from Nigeria, this paper explores the living standard and inequality implications of access to formal finance. Formal access to finance is found to improve household welfare, but also increase inter-household inequalities, despite ameliorating the inequality enhancing effect of urban versus rural residence and enhancing the inequality ameliorating effect of greater educational attainment. The positive effect of access to formal finance on inequality is substantially smaller than the effect of unobserved household characteristics, indicating that welfare and equality enhancing strategies should follow a holistic approach.


Access to finance, treatment effects, decomposition, Nigeria


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