Determinants of Financial Inclusion: An Empirical Study on the Inter-State Variations in India
15 Pages Posted: 5 Aug 2013
Date Written: July 19, 2013
The access to finance by the poor is a prerequisite for poverty reduction and sustainable economic development of a country. The importance of financial inclusion arises from the problem of financial exclusion of nearly 3 billion people who are away from the formal financial services across the world (Kempson Clarie, 2006). This paper attempts to measure the inter-state variations in the access to finance, using a composite Financial Inclusion Index (IFI) developed by Sarma (2008). This paper attempts to identify and analyze the determinants of financial inclusion. The analysis reveals the fact that among the socio-economic factors, Income, Literacy and Population were found to have significant association with the level of financial inclusion. Among the banking variables, deposit and credit penetration recorded significant association with financial inclusion. Finally, credit-deposit ratio and investment ratio did not have significant association with financial inclusion.
Keywords: Financial Inclusion Index, Literacy, Unemployment, Credit-Deposit Ratio, Investment Ratio
JEL Classification: E20, E40, G21
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