In fighting to eradicate poverty from the world, examining the factors that are determiningrngrowth, poverty and inequality is one of critical steps. As a result of this, during the pastrndecades, the research on the impact of financial development on welfare has got a lot ofrnattention. Thus, this study deals with assessing the direct and indirect effect of financialrndevelopment in reducing poverty by considering the simultaneous effects of economic growthrnand inequality in Ethiopia. In order to investigate this, the time series data has been used withrnsimultaneous equation model for the period of 1991 to 2019. Based on the econometric analysisrnresults, first, the finding shows that through the direct channel, financial development increasesrnthe proportion of population living below the national poverty line. This is due to the financialrnintermediaries are not adequately channeling finance to the pro-poor sectors and SMEs. Second,rnfinancial development enhances poverty reduction and lift up the poor through indirect channelsrnof economic growth and income distribution. Third, institutional quality plays a crucial role inrnpoverty reduction. Finally, the inverted â€œUâ€ shape of Kuznets curve that is explaining thernaverage income and inequality in the long run is not robust and the model is unverified. In thernaddition, another interesting finding is that there is a long run cointegration relationshiprnbetween financial development and poverty eradication. Therefore, it is concluded that financernplays a significant role on poverty reduction, growth and income distribution. So the governmentrnshall design a policy which is pro-poor and SMEs to assure access of financial services tornenhance entrepreneur innovation, productivity, human capital and industrial development.