Socio-economic determinants of financial inclusion: An evaluation with a microdata multidimensional index

Financial inclusion is a central theme in development policy. While it involves changes at the individual level and comprises several interrelated financial activities, most existing measures rely on macroeconomic variables. We construct an alternative index of financial inclusion using the World Bank Findex-a microdata dataset with 451,372 observations. Applying it, we first analyse the socio-economic determinants of financial inclusion. Second, we propose a new country ranking of financial inclusion. Our findings comprise three features. First, we do not find evidence of a gender gap in low- and middle-income countries. Second, richer individuals display higher levels of financial inclusion. Third, countries with high self-employment rates exhibit lower levels of financial inclusion. Our results suggest that financial inclusion is more related to income and employment status than gender disparities, which could lead to a different approach from policymakers on promoting the inclusion of the poor into the formal financial system.

Automated summary

Financial inclusion is an important theme in development policy. This study constructs an alternative index of financial inclusion and analyzes its socio-economic determinants. The study also proposes a new country ranking of financial inclusion. The findings suggest that there is no gender gap in financial inclusion in low- and middle-income countries, and individuals with higher incomes are more financially included. Additionally, countries with high self-employment rates tend to have lower levels of financial inclusion.