Economic Growth, Financial Deepening, Income Distribution, Financial Efficiency and Poverty Levels in East African Community Countries

Abstract

The main objective of this study was to investigate the relationship between economic growth, financial deepening, income distribution, financial efficiency and poverty levels in East African Community countries. The specific objectives of the study included establishing the effect of economic growth on poverty levels in EAC countries; determining the effect of financial deepening on the relationship between economic growth and poverty levels in EAC countries; examining the effect of income distribution on the relationship between economic growth and poverty levels in EAC countries; examining the effect of financial efficiency on the relationship between economic growth and poverty levels in EAC countries; determining the joint effect of economic growth, financial deepening, income distribution and financial efficiency on poverty levels in EAC countries; and comparing the relationship between economic growth, financial deepening, income distribution and financial efficiency on poverty levels among EAC countries. The research design used in this study was a combination of comparative and descriptive. The financial intermediation theory, liberal theory, information asymmetry theory, public choice theory of distribution and neoclassical utility theory were the major theories that underpinned this research project. Through the course of the study, the positivism philosophy was followed. Kenya, Rwanda, Uganda, Burundi, and Tanzania were the five countries studied as part of the East African Community (EAC) study. It was necessary to collect annual data for the study's duration, which spanned from 1989 to 2018. The study made use of secondary data, which consisted primarily of annual data. Feasible Generalized Least Squares (FGLS) panel data regression models and hypotheses testing to determine whether there is a causal effect link between the various variables, inferential statistics analysis was carried out. A significant mediating effect on the relationship between economic growth and poverty levels in East African Community countries, according to the findings of the study, was also discovered. The study also discovered that income distribution has a significant mediating effect on the relationship between economic growth and poverty levels in countries of the Eastern African Community. Additionally, according to the findings of the study, financial efficiency has no statistically significant moderating effect on the relationship between economic growth and poverty levels in East African Community countries. After all was said and done, researchers discovered that the combined effect of economic growth, financial deepening, income distribution, and financial efficiency on poverty levels in the East African Community countries was statistically significant. Thus, policy recommendations and implications for the EAC countries are provided as a result of the study's results.