Index of Financial Inclusion: Some Empirical Results

Ram Sinha

Chapter 28 in Analytical Issues in Trade, Development and Finance, 2014, pp 467-478 from Springer

Abstract: Abstract Empirical evidences suggest that there are considerable interstate variations in the provision of financial services across the Indian states and union territories. However, cross-state comparison in this matter requires the construction of some index which could gainfully be employed to make such a comparison. Sarma (Index of Financial Inclusion. ICRIER Working Paper No 215, 2008) proposed a framework for the computation of an index of financial inclusion (IFI) in the lines of the Human Development Index (HDI). This chapter shows how such indices could also be developed using the non-parametric approaches. In this context, this chapter computes the IFI of 29 Indian states and 6 union territories for the year 2005–2006 using both Euclidean and output distance function approach. The chapter also tries to capture the regional variation in the scores which indicates the extent of regional asymmetry which is persistent in the Indian economy in the matter of financial inclusion.

Keywords: Index of financial inclusion; Micro-finance institutions; Commercial banks; Regional rural banks; Non-governmental organisations (NGOs); Self-help groups (SHGs); Rural–urban gap; Euclidean distance function; Shepherd’s distance function; Returns to scale; Output distance function approach (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/978-81-322-1650-6_28

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