The Smallholder Financial Inclusion index: measuring access and usage of financial services in the Global South

In the Global South, smallholder farmers are among the most financially excluded groups and appropriate indicators are essential to develop targeted support mechanisms. As financial inclusion is a complex and multidimensional phenomenon, we design a framework to link the concepts of access and usage of financial services and propose the Smallholder Financial Inclusion Index (SFI). We use Multiple Correspondence Analysis to identify 12 relevant indicators to measure financial inclusion and calculate weights. To demonstrate the applicability of the index, we use data from smallholders in Bangladesh, Uganda, Tanzania, Nigeria, and Ivory Coast to compare household, regional, and national financial inclusion. The results show Uganda has the highest SFI score at 35.45, followed by Bangladesh at 31.85, Tanzania at 22.49, Nigeria at 17.49, and Ivory Coast at 11.28. This index can be disaggregated to regional levels, allowing policymakers to identify vulnerable parts of the country and their specific financial needs (e.g., using bank accounts for saving and acquiring loans). For example, in Nigeria, farmers in the coastal regions report access to savings almost twice as large as in the central region. Lastly, we estimate a censored regression model using the household scores to understand factors driving household financial inclusion. We find that information channels are significantly associated with financial inclusion. The proposed index shows that a detailed understanding of financial inclusion can support policymakers in targeting excluded groups at the household and regional levels.