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

Vanesa Pesqué‐Cela, Lihui Tian, Deming Luo, Damian Tobin and Gerhard Kling

Journal of International Development, 2021, vol. 33, issue 2, 316-341

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 towards 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.

Date: 2021
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https://doi.org/10.1002/jid.3524

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Persistent link: https://EconPapers.repec.org/RePEc:wly:jintdv:v:33:y:2021:i:2:p:316-341

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