MPDD Working Paper on Towards inclusive financial development for achieving the MDGs in Asia and the Pacific

Working paper4 Oct 2010

Financial development enhances domestic resource mobilisation and also allows these resources to the most productive uses. While there is little doubt that financial development leads to higher economic growth which may then lead to poverty reduction, financial development in itself will allow developing countries to achieve the Millennium Development Goals (MDGs). We will argue in the paper that a more relevant dimension of financial development that is important for the achievement of the MDGs is inclusiveness of the financial system. We will develop concepts and measures of inclusive financial development and show that measures of inclusive financial development are positively correlated with progress towards the attainment of MDGs. We will also present evidence of how inclusive financial development can contribute to reaching the MDGs. Finally, we will discuss some analytical principles and issues relating to inclusiveness in financial development.