Triggers and Barriers of Financial Inclusion: A Country-Wise Analysis

Abstract

The objective of this study was twofold. The first goal was to construct a composite multi-dimensional index for financial inclusion using two stage principal component analysis for 91 countries for two benchmark years, 2011 and 2014 which includes both supply and demand side factors and compare the rank mobility using the World Bank Findex database. The second goal was to track the binding determinants of financial inclusion using a panel fixed effects model. A panel ordered probit model was used to judge the extent of causality between growth, sectoral share, female workforce participation, poverty reduction with different levels of financial inclusion. The middle- and low-income countries can reach their potential if the sources of barriers have been tracked efficiently as this is the main constraint for an inclusive financial system. Toreduce the multidimensional poverty through endogenous stimulus of the poor population in South-Asian, Sub-Saharan and few Latin American countries, it is essential to reinforce the provision of financial resources for the working-age female population and to improve the affordability and accessibility of inclusive investment for rural populations.