Impact of Financial Inclusion on Individual’s Standard of Living: Empirical Evidence From SAARC Countries

Abstract

The aim of this study is to examine the impact of financial inclusion on individual’s standard of living in SAARC countries over the period 2004 to 2015. With the help of IMF database, the study has constructed a financial inclusion index through using Principal Component Analysis (PCA), to measure the accessibility, availability and usability of financial products and services in SAARC countries.For measuring people’s standard of living, GDP Per capita has been used as a proxy variable, which is collected from World Bank database. Using FMOLS (Fully Modified Ordinary Least Squares) and DOLS (Dynamic Ordinary Least Squares) model, the study finds that financial inclusion plays significant role in enhancing people’s standard of living. The study also indicates that financial inclusion and GDP per capita has a long run association between them. Furthermore, the study concludes that both financial inclusion and GDP Per capita have bi-directional relationship with each other.