What Determines the Success of Financial Inclusion? An Empirical Analysis of Demand Side Factors

Abstract:

A financially well included society can have an extremely positive effect on the economy.  Financial Inclusion is impacted by demand side and supply side factors.  It is important to understand the factors affecting financial inclusion from the demand side which can be truly identified by conducting a survey.  While extant literature highlights the importance of the supply side factors, there has been little study to appreciate the challenges that people in emerging economies face with respect to banking.

Given the backdrop of the new policies with respect to financial inclusion, we attempted to understand the demand side perception of respondents to identify the causes of inclusion/exclusion. The techniques used for analysis are Exploratory Factor Analysis and Confirmatory Factor Analysis.  Some of the main factors that were found include technological factors, the benefits that bank accounts offer, banking outreach, and demographic factors.   Banks need to focus on such dimensions more effectively to achieve the Government’s target of making the economy completely inclusive.

Keywords:

Banks; Demand side factors; Exploratory factor analysis (EFA); Supply side factors; Technological factors

JEL Classification:

G18, G21, G28

Citation as:   

Ramakrishna, S., and P. Trivedi (2018). "What Determines the Success of Financial Inclusion?  An Empirical Analysis of Demand Side Factors", Review of Economics & Finance, 14(4): 98-112.