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This paper empirically examines the existence of direct effects of financial development on poverty reduction in sixty-seven low and middle income countries over the period of 1986-2009. The empirical results suggest that financial development contributes directly to the reduction of poverty, and this is independent of the econometric method used. On the other hand, instability related to financial development would penalize the poor and annihilate the positive effects of financial development. Thus, the question arises as to whether it is necessary to find a trade-off between financial development and its instability in order to ensure pro-poor growth.