Financial development and poverty: evidence from the CFA Franc Zone

International audienceThe financial liberalization in the 1980s and early 1990s led the CFA Franc Zone countries todeepen reforms in their financial systems. These reforms fostered financial development, which inturn may have reduced income poverty, as emphasized by several theoretical arguments in theliterature. This study aims at estimating the contribution of financial development to povertyalleviation in the CFA Franc Zone. Results based on a panel of CFA Franc Zone countries showthat financial development is associated with a drop in the proportion of poor population. Next,financial development reduces the extent to which the income of individuals falls below thepoverty line. Moreover, in some cases, the effect of financial development on poverty may besubject to nonlinearities. Finally, financial instability or unstable financial development leading tocrises may mitigate the favourable effect of financial development on poverty reduction. Thesefindings are robust to the use of alternative measures of financial development and hold aftercontrolling for a potential simultaneity and a small sample biases