Determinants of Financial Inclusion: Comparative Study of Asian Countries

Abstract

Using panel data of twenty Asian countries over a period of six years (2011-2016), this research investigated the key determinants of financial inclusion among Asian countries via the Random Effects Model (REM). Financial inclusion has been considered as enabler for seven of the seventeen sustainable development goals, which brings access to financial services to all and directly contributes to poverty reduction, capacity buildings and equality. The main findings are that: (i) the countries with stronger economic growth and higher income have a significantly higher financial inclusion index, as people have more resources/incomes and better chances to utilize financial services; (ii) the higher the literacy, the better the financial inclusion as people with higher literacy understand the pros and cons of financial services and providers, better knowledge of using financial services wisely; (iii) unemployment rates had a negative impact on the financial inclusion index; (iv) surprisingly differing from previous studies, inflation, population density, network and deposit interest rate were not statistically significantly correlated with financial inclusion.