Planning and Budgeting

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Poverty is an issue that has been for many years and despite the world economic growth and the implementation of various policies against to poverty, it is also surround many people's lives and its decrease has become into one of the most important objectives of economic policymakers world. Financial sector for links with other different sectors of society plays important role and it can change the poverty through ways such as to facilitate exchange, credit, reducing risk and providing other financial services. The aim of this paper is to investigate the effect of financial development on reducing poverty in Islamic countries are members of group D8 using an unbalanced panel data approach for the period 1990-2010. Due to the economic structure based on natural resources in the members of group D8 and in these countries financial development is not in order to develop markets of new factors production and innovation, the results indicate that the effect of financial development on poverty is insignificant. Also, the results show the variable revenue growth has negative and significant effect on poverty. Also, because the variable of human capital has very small share in economic growth (due to Lack of coordination of macroeconomic policies and education policies) the human capital variable has negative and insignificant effect on poverty. Also, the variables such as inflation and economic freedom have positive and significant effect on poverty. This result for the economic freedom variable is due to structure of the economy of countries of group d8 that relies on natural resources. In that economy human capital has small share in economy, improvement in the economic freedom is just in rules of international trade and financial and business markets while we do not see improvement in rules of labor markets, Judicial structure, Property Rights that these are in favor of the poor.

Keywords: Financial Development, Poverty, Group of D8, Human Capital, Panel Data.

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