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 journalArticlepeer-review

16 Citations (Scopus)
6 Downloads (Pure)

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
Pages (from-to)316-341
Number of pages26
JournalJournal of International Development
Volume33
Issue number2
Early online date18 Jan 2021
DOIs
Publication statusPublished - Mar 2021

Bibliographical note

Acknowledgements:
We are very grateful for the financial support provided by the ESRC and NSFC (Newton Fund). This paper is part of the research project entitled ‘Research on China's Financial System towards Sustainable Growth: The Role of Innovation, Diversity and Financial Regulation’ (ESRC: ES/P005241/1 and the National Natural Science Foundation of China: 71661137002). In addition, this research was supported by the National Social Science Foundation of China (Project Number: 17ZDA071). Data and STATA do files will be available to download from ReShare.

Keywords

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

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