Role of financial institutions in poverty alleviation: Nexus of domestic credit, digital transactions and poverty in South Asia

The main objective of this study is to test the impacts of lending by various types of financial institutions on poverty, employment, and new business startups. The study is based on seven equations estimated through the ordinary least squares (OLS) technique and censored TOBIT equations. These estimations are based on 21 years of data from 3114 financial institutions. Empirical pieces of evidence based on firm-level data reveal that the donations in the formation of the equities of lending institutions are a significant determinant of lending to clients below the poverty line. It was observed that commercial banks provide more lending for hiring labor than other lending institutions. This conclusion emphasizes the importance of commercial banks for the transfer of fiscal resources to the middle- and lower-income groups. The study recognizes the importance of financial institutions in the South Asian context.