Constructing a composite financial inclusion index for developing economies
Thi Xuan Huong Tram,
Tien Dinh Lai and
Thi Truc Huong Nguyen
The Quarterly Review of Economics and Finance, 2023, vol. 87, issue C, 257-265
Abstract:
This study measures financial inclusion for developing countries. Given that financial inclusion is determined by three dimensions: penetration, availability, and use of financial services, this study develops a composite financial inclusion index (FI index) by adding “mobile money”–related indicators to the three dimensions to correspond to the degree of financial inclusion in these economies. To address the main research question, a measure of financial inclusion is constructed using a two-stage principal component analysis (PCA) method by assigning weights endogenously. Data were collected through secondary sources, including the World Bank (WB) and International Monetary Fund (IMF) reports for 2012–2018International Monetary Fund, 2020International Monetary Fund (IMF) reports for 2012–2018. A new detailed index of financial inclusion measurement termed overall FI index was built based on the study. It is a useful tool for policymaking and evaluation. Our composite FI index is easy to calculate and comparable across economies over time. Particularly, this approach can address the criticism of arbitrary weight selection and comprehensively reflects the degree of financial inclusion.
Keywords: Financial inclusion; Measuring financial inclusion; Financial inclusion index; (FI index) (search for similar items in EconPapers)
JEL-codes: G2 G21 G28 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:87:y:2023:i:c:p:257-265
DOI: 10.1016/j.qref.2021.01.003
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