POVERTY, HUMAN DEVELOPMENT AND FINANCIAL DEVELOPMENT IN ARAB AFRICAN COUNTRIES: IS THERE A NEXUS?

This study examines the relationship between poverty, human development, and financial development in eight Arab African countries over the period 1991-2021, with a focus on the reverse nexus whereby social development drives financial sector expansion. Using a Panel ARDL model, the analysis captures both short-run and long-run dynamics, complemented by the Granger causality test to assess causal directions. The results reveal a significant long-run relationship among the variables. Poverty exerts a negative and significant effect on financial development, while human development contributes positively to financial deepening and inclusion. In the short run, no significant effects are observed, reflecting the delayed impact of social factors. Causality findings indicate a bidirectional relationship between poverty and financial development, and a unidirectional effect from human development to financial development. These results underscore the importance of sustained investments in human capital and poverty reduction policies to promote inclusive financial development in Arab African countries.