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Measuring Financial Inclusion using Multidimensional Data

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  • Mandira Sarma

Abstract

The author notes that the lack of a financially inclusive system is a major concern not only for developing and low-income economies, but for many developed and high-income countries. At the global level, a network of financial regulators from developing and emerging economies, called the Alliance for Financial Inclusion (AFI), was formed in 2008 to provide a platform for peer-to-peer learning from the experiences of country specific policies of financial inclusion. The paper notes that there has been an intensive debate about how financial inclusion should be measured. In consequence, it recommends using the Index of Financial Inclusion (IFI), developed by the author. The IFI is multidimensional, it satisfies many important mathematical properties and can be used to compare levels of financial inclusion across economies and over time. IFI values computed for 110 countries for 2014 show various levels of financial inclusion: Chad ranked lowest with an IFI value of 0.021 while Switzerland had a value of 0.939. Measuring the IFI over 2004 – 2014 indicates a general improvement in the level of financial inclusion across countries, but the availability of data is the biggest constraint on its usefulness.

Suggested Citation

  • Mandira Sarma, 2016. "Measuring Financial Inclusion using Multidimensional Data," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 17(1), pages 15-40, January.
    • Handle: RePEc:wej:wldecn:632
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Measuring financial inclusion: how much do households participate in the formal financial system?
      by x in Ajay Shah's blog on 2022-07-03 05:02:00

    Citations

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    Cited by:

    1. Do Nam Hung & Jacquline Tham & S. M. Ferdous Azam & Abdol Ali Khatibi, 2020. "An Empirical Analysis of Perceived Transaction Convenience, Performance Expectancy, Effort Expectancy and Behavior Intention to Mobile Payment of Cambodian Users," International Journal of Marketing Studies, Canadian Center of Science and Education, vol. 11(4), pages 1-77, March.
    2. Lay, Sok Heng, 2018. "Mobile Phones and Financial Access: Evidence from the Finscope Surveys of Selected Asian Countries," MPRA Paper 87216, University Library of Munich, Germany, revised 30 May 2018.
    3. Vesna Vesna Zukić & Meldina Kokorović Jukan, 2023. "Measuring Financial Inclusion in Southeast European Countries Using Multidimensional Index of Financial Inclusion," International Business Research, Canadian Center of Science and Education, vol. 16(8), pages 1-39, August.
    4. Thereza Balliester Reis, 2022. "Socio‐economic determinants of financial inclusion: An evaluation with a microdata multidimensional index," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(3), pages 587-611, April.
    5. Rigzin Yangdol & Mandira Sarma, 2019. "Demand-side Factors for Financial Inclusion: A Cross-country Empirical Analysis," International Studies, , vol. 56(2-3), pages 163-185, April.
    6. Shreya Pal & Indranil Bandyopadhyay, 2022. "Impact of financial inclusion on economic growth, financial development, financial efficiency, financial stability, and profitability: an international evidence," SN Business & Economics, Springer, vol. 2(9), pages 1-29, September.
    7. Muri Wole Adedokun & Mehmet Ağa, 2023. "Financial inclusion: A pathway to economic growth in Sub‐Saharan African economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2712-2728, July.
    8. Sheng Xu & Michael Asiedu & Nana Adwoa Anokye Effah, 2023. "Inclusive Finance, Gender Inequality, and Sustainable Economic Growth in Africa," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(4), pages 4866-4902, December.

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