The geography of financial inclusion across Europe during the global crisis

Abstract

This article identifies the main determinants of financial inclusion, defined as the probability of using both banking and credit services, across 18 Eastern European economies and 5 Western European ‘comparator’ countries. We elicit demographic and socio-economic information on 25,000 European households from the second round of the Life in Transition Survey undertaken during the 2008–2010 global crisis; the survey also includes several questions on households’ financial decisions collecting data at the regional and local level. Our results show that households hit by negative job or income shocks and without any asset to pledge are less likely to be financially included, especially in Eastern Europe. The individual likelihood of financial inclusion is also affected by the average use of financial services at the local level suggesting the presence of a financial multiplier effect. These results provide useful information for mapping financial inclusion across Europe during the crisis, which in turn can inform policy action at the local level.