Defining and measuring financial inclusion: A systematic review and confirmatory factor analysis

Vanesa Pesque-Cela, Lihui Tian, Deming Luo, Damian Tobin, Gerhard Kling* (Corresponding Author)

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

This study re-examines the construct of financial inclusion, through a literature review and confirmatory factor analysis (CFA). First, we conduct a systematic review of definitions, measures, and data sources. Second, we apply CFA to test two prominent financial inclusion indices. The CFA analysis reveals a high correlation between the “access” and “use” dimensions; hence, indices fail to capture the multidimensionality of financial inclusion. Existing indices tend to be biased toward measuring the supply-side and quantitative aspects of financial inclusion. The extent to which lower-income individuals and smaller firms have been incorporated into the formal financial sector is not captured.
Original languageEnglish
JournalJournal of International Development
Publication statusAccepted/In press - 17 Nov 2020

Keywords

  • Financial inclusion
  • access to finance
  • systematic review
  • measures
  • confirmatory factor analysis

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