Financial inclusion and its heterogeneous effect on household income

This paper examines how, in the main Colombian cities, the effect of financial inclusion (FI) on income changes along the distribution of household income considering labor informality. We construct a multidimensional FI indicator based on the World Bank definition and on the data. Using a quantile regression technique, we estimate the effect of FI on income at each quantile for informal and formal households. The findings indicate that FI has a positive impact throughout the income distribution but is greater in low-income and informal households. The results suggest that FI can have potential effects in alleviating poverty and closing the income gap.