Unveiling Regional Disparities: A Comparative Analysis of Financial Inclusion Using Mahalanobis and Euclidean Distance Indices in the Case of Romania

Despite the increasing global focus on financial inclusion, a significant gap remains in analyses at the NUTS3 level, particularly within the European context. This study addresses this gap by using Romania as a case study to assess regional disparities in financial inclusion across its NUTS3 regions. Two indexing methods are compared – the Mahalanobis distance-based model (IFIMd) proposed by Li and Wang and the Euclidean distance-based model (IFIEd) proposed by Sarma—to construct a Financial Inclusion Index (FII) for 2018. The findings reveal considerable regional disparities, with Bucharest exhibiting the highest inclusion rates and Caras-Severin the lowest. The Mahalanobis distance model demonstrates superior accuracy in clustering these regions with similar financial inclusion characteristics, offering a more nuanced understanding of these regional dynamics. This research contributes to the literature by highlighting the critical need for advanced indexing methods at the subnational level to effectively capture financial inclusion disparities, providing valuable insights for policymakers seeking to enhance financial access in Romania and beyond.