Index of Financial Inclusion and the Determinants: An Investigation in Asia

Abstract

This study examines the factors that have impacts on financial inclusion level of Asian economies in the period 2008-2016. This study first measures the index of financial inclusion, which represents the inclusiveness level of financial system of each country. Using the dataset provided by World Bank regarding income, gender ratio, rural population, unemployment and infrastructure, this study explores the link between these variables and the index of financial inclusion. The estimation results reveal that financial inclusion is directly influenced by infrastructure, particularly cell phone subscriptions, while rural and unemployment ratio are the significant factors that decrease the inclusiveness level. These findings are expected to support the policy makers, the banks and other financial institutions in the progress of involving the whole communities in the formal financial systems. Improving infrastructure, reducing joblessness, and developing rural regions should be the effective acts to build up the future of financial inclusion for Asiatic economies.