Articles
DOI DOI: 10.5281/zenodo.18435733

Digital Financial Inclusion, SME Productivity and Poverty Dynamics in Pakistan A Micro–Macro Linked Investigation

Shahzad Kouser1
  1. 1 COMSATS University Islamabad (CUI), Islamabad, Pakistan

Abstract

This paper investigates the impact of digitization of financial inclusion (DFI) on
small and medium enterprises (SME) productivity on one hand and household
poverty dynamics on another in Pakistan via simultaneous microeconomic as
well as macroeconomic channels. We build a micro–macro linked model that
integrates (i) firm-level channels – reduced transaction costs, better working
capital management, and increased digital access to credit – with (ii) macro factors
shaping pass-through from finance to real activity, such as monetary contraction,
inflation and growth deceleration. Based on a mixed evidence design, we identify
and estimate econometric models appropriate for combining household welfare
microdata with SME survey variables and macro-financial time series. Results
extracted from the newest empirical literature and Pakistan’s official statistical
framework show that DFI is most closely related to productivity gains for
liquidity-constrained SMEs, poverty reduction through an increment in labour
income and consumption smoothing, however, effects vary by gender, province
and informality. Policy simulations show that companion reforms—digital ID
coverage, interoperability, consumer protection policies, and targeted SME
finance—substantially enhance the poverty-reduction elasticity of DFI.

How to Cite

Kouser, S. (2026). Digital Financial Inclusion, SME Productivity and Poverty Dynamics in Pakistan A Micro–Macro Linked Investigation. Transnational Academic Journal of Economics, 3(1), 66–79. https://doi.org/10.5281/zenodo.18435733
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