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Spatial financial inclusion/exclusion hot spots and its determinants in India: a district-level analysis

Author

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  • Rajat Singh Yadav

    (Gokhale Institute of Politics and Economics)

  • Kalluru Siva Reddy

    (Gokhale Institute of Politics and Economics)

Abstract

This paper tests the absolute and conditional convergence hypothesis in financial inclusion performance and investigates the spatial convergence factors affecting the financial inclusion and exclusion levels based on continuous data from India from 2011 to 2018. By using the Global Moran's I and local indicators of spatial association (LISA), we find evidence of the presence of spatial dependencies in the financial inclusion index (FII) across 591 Indian Districts. FII scores converged by 15.4% using socioeconomic factors and 17% using financial literacy factors as conditional variables. The spatial convergence results show that low banking services are associated with the pattern of spatial disparities in distribution of vulnerable populations, who are likely to be less financially inclusive in the district, and the neighborhood effect exists with the low financial soundness population. The findings of this study are more suited for both political and economic debate because, after a local cluster it is recognized as 'hot spots' and 'cold spots,' i.e., regions with high and low levels of financial inclusion with similar neighbors, respectively. It is now up to local governments or policymakers to determine the source of the cluster based on socioeconomic criteria and minimize financial disparity through financial literacy and awareness initiatives in order to create inclusive and sustainable growth in India.

Suggested Citation

  • Rajat Singh Yadav & Kalluru Siva Reddy, 2023. "Spatial financial inclusion/exclusion hot spots and its determinants in India: a district-level analysis," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 25(1), pages 101-126, December.
    • Handle: RePEc:spr:jsecdv:v:25:y:2023:i:1:d:10.1007_s40847-023-00250-3
    DOI: 10.1007/s40847-023-00250-3
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