Debebe, Sisay (PhD)Della, Amanuel2022-03-082023-11-042022-03-082023-11-042021-08http://etd.aau.edu.et/handle/123456789/30493In fighting to eradicate poverty from the world, examining the factors that are determining growth, poverty and inequality is one of critical steps. As a result of this, during the past decades, the research on the impact of financial development on welfare has got a lot of attention. Thus, this study deals with assessing the direct and indirect effect of financial development in reducing poverty by considering the simultaneous effects of economic growth and inequality in Ethiopia. In order to investigate this, the time series data has been used with simultaneous equation model for the period of 1991 to 2019. Based on the econometric analysis results, first, the finding shows that through the direct channel, financial development increases the proportion of population living below the national poverty line. This is due to the financial intermediaries are not adequately channeling finance to the pro-poor sectors and SMEs. Second, financial development enhances poverty reduction and lift up the poor through indirect channels of economic growth and income distribution. Third, institutional quality plays a crucial role in poverty reduction. Finally, the inverted “U” shape of Kuznets curve that is explaining the average income and inequality in the long run is not robust and the model is unverified. In the addition, another interesting finding is that there is a long run cointegration relationship between financial development and poverty eradication. Therefore, it is concluded that finance plays a significant role on poverty reduction, growth and income distribution. So the government shall design a policy which is pro-poor and SMEs to assure access of financial services to enhance entrepreneur innovation, productivity, human capital and industrial development.en-USFinancial developmentEconomic growthPoverty and InequalityThesis