Measuring Financial Inclusion for Asian Economies

Abstract

Asian economies are at different levels of economic and financial sector development. While Japan, Singapore, and the Republic of Korea belong to the high-income Organisation for Economic Co-operation and Development (OECD) group of countries, on the other end of the wide spectrum are low-income countries that include Cambodia, Nepal, and Bangladesh. Within the middle-income countries of Asia, there are countries such as Malaysia and the Maldives that are far better off than Pakistan and India. The various stages of economic development are also reflected in the diverse stages of financial sector development in these economies. While the literature on economic development has adequately discussed the link between financial sector development and economic development, there has not been much discussion of whether financial development implies financial inclusion. Financial inclusion can be defined as a process that ensures the ease of access, availability, and usage of the formal financial system for all members of an economy. It has been observed that even ‘well-developed’ financial systems have not succeeded in being ‘all-inclusive’, and certain segments of the population remain outside the formal financial systems.