Formal financial penetration and households' welfare in Pakistan

The studies in recent era exhibit that the financial inclusion has become a scorching issue in playing its vital role while improving the lives of vulnerable and underprivileged households' well-being. But, the microdata impact of financial inclusion on household welfare is not being analyzed to substantial extent in Pakistan yet. Therefore, it is imperative to examine the effects of financial inclusiveness on the living standards of individuals to persuade them toward formal financial inclusion. Thus, the study attempts to explore the link between an expanded formal financial system and poverty alleviation through smooth consumption levels, providing access to credit and investment facilities to the individuals. For this purpose, the household level data of Household Integrated Economic Survey (HIES) for the time-period of 2013-2014 to evaluate the microlevel effect of formal financial inclusion, realizing solitarily for the remittance receiving households have been used. The well-being of households receiving formal financial inflows got highly affected by facilitating the remittance receivers through instant, reliable and frequent transfer of funds. Therefore, the main objective of the study is to investigate the effect of formal financial transfers on the socio-economic status of remittance receiving and nonreceiving individuals. The outcomes of the study suggest that the household welfare is greatly influenced by the formal financial inclusiveness along with other variables such as annual income, education level of the family, number of earning members, loans borrowed by the family, land and building ownership, and the head employed are found to be positively and significantly determining the household's welfare.