Indian Journal of Finance

Open Access Open Access  Restricted Access Subscription Access

Antecedents and Extent of Financial Inclusion : A Cross-Sectional Study


Affiliations
1 Ph.D. & Independent Researcher, Motilal Nehru National Institute of Technology, Allahabad, Prayagraj - 211 004, Uttar Pradesh, India
2 Associate Professor, Institute of Technology and Sciences, Ghaziabad - 201 007, Uttar Pradesh, India

   Subscribe/Renew Journal


According to the latest study by World Bank on financial inclusion, globally 31% of people are excluded from access to formal financial services. But despite growth in account ownership, inequality persists. The objective of the present study was to examine the current status of financial inclusion and to further explore the factors leading towards the lower level of financial access among the households. The study was conducted in four districts of the National Capital Region in India namely, Ghaziabad, Noida, Gurugram, and Faridabad, with a sample size of 300 respondents between the period of 2018 – 2019. The study is unique in nature, as the survey was conducted both in rural and urban areas. The factor analysis technique was applied to explore a large set of variables into few factors affecting the financial inclusion. Further, the households were grouped into three degrees on the basis of their financial behavior and attitude. Finally, the study concluded that supply-side and demand-side factors were the main factors for the lower access to basic banking services. Furthermore, financial attitude, financial knowledge, and financial behavior were the factors shaping the minds of the respondents. The results revealed that majority of the respondents fell under Degree 1, that is, having access to banking products, but their level of financial literacy and active usage of bank accounts was significantly low. Therefore, it is concluded that though a sufficient number of people had a formal bank account, there existed a low level of financial literacy due to which they were not active users of financial services.

Keywords

Financial Inclusion, Economic Development, Financial Access, Commercial Banks, RBI.

JEL Classification : I3, O1, O16.

Paper Submission Date : April 13, 2020; Paper Sent Back for Revision : September 11, 2020; Paper Acceptance Date : November 12, 2020; Paper Published Online : March 15, 2021.

User
Subscription Login to verify subscription
Notifications
Font Size

  • Acharya, D., & Parida, T. K. (2013). Financial inclusion in India: Why not happened (Project Report). http://iibf.org.in/documents/reseach-report/Final-Report-on-FI-for-IIBF-by-DAcharya-and-TParida.pdf

  • Adegbite, O.O., & Machethe, C.L. (2020). Bridging the financial inclusion gender gap in smallholder agriculture in Nigeria : An untapped potential for sustainable development. World Development, 127, 104755. https://doi.org/10.1016/j.worlddev.2019.104755

  • Allen, F., Demirguc-Kunt, A., Klapper, L., & Martinez Peria, M. S. (2016). The foundations of financial inclusion: Understanding ownership and use of formal accounts. Journal of Financial Intermediation, 27, 1–30. https://doi.org/10.1016/j.jfi.2015.12.003

  • Beck, T., Kunt, A. S., & Hanohan, P. (2009). Access to financial services : Measurement, impact, and policies. The World Bank Research Observer, 24(1), 119–145. https://documents.worldbank.org/en/publication/documentsreports/documentdetail/547661468161359586/access-to-financial-services-measurement-impact-and-policies

  • Bhuyan, M., Das, B.K., & Mohanty, J. (2018). Product awareness of account holders under Pradhan Mantri Jan Dhan Yojana (PMJDY). Indian Journal of Finance, 12(12), 52–64. https://doi.org/10.17010/ijf/2018/v12i12/139891

  • Cabeza-Garcia, L., Del Brio, E.B., & Oscanoa-Victoria, M.L. (2019). Female financial inclusion and its impact on inclusive economic development. Women’s Studies International Forum, 77, 102300. https://doi.org/10.1016/j.wsif.2019.102300

  • Datta, S.K., & Singh, K. (2019). Variation and determinants of financial inclusion and their association with human development : A cross-country analysis. IIMB Management Review, 31(4), 336–349. https://doi.org/10.1016/j.iimb.2019.07.013

  • Demirgüç-Kunt, A., Beck, T., & Honohan, P. (2008). Finance for all ? : Policies and pitfalls in expanding access (World Bank Policy Research Report). https://openknowledge.worldbank.org/handle/10986/6905

  • Demirguc-Kunt, A., Klapper, L., & Randall, D. (2014). Islamic finance and financial inclusion : Measuring use of and demand for formal financial services among Muslim adults. Review of Middle East Economics and Finance, 10(2), 177–218.

  • Demirguc-Kunt, A., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). The global findex database 2017: Measuring financial inclusion and fintech revolution. World Bank Group. https://openknowledge.worldbank.org/handle/10986/29510

  • Erra, K.S.S., & Acharya, D. (2021). Financial inclusion across major Indian states : Some spatial panel econometric evidence. International Journal of Social Economics, 48(3), 419–436. https://doi.org/10.1108/IJSE 06-2020-0392

  • Field, A. P. (2009). Discovering statistics using SPSS (and sex and drugs and rock’ n’ roll) (3rd ed.). SAGE Publications.

  • Gandhi, R. (2015, May 16). Financial inclusion, financial literacy & role of technology. The Economic Times. https://m.economictimes.com/news/economy/finance/financial-inclusion-financial-literacy-role-oftechnology/articleshow/47305993.cms

  • Ghosh, S., & Sahu, T.N. (2020).How Financially inclusive the Asian’s are–An empirical analysis. Rajaigiri Management Journal, 14 (1), 49–69. https://doi.org/10.1108/RAMJ-01-2020-0003

  • Ghosh, S., & Vinod, D. (2016). Furthering the financial inclusion agenda in India ? How important is gender. Economic and Political Weekly, 51(12), 128–132. https://www.epw.in/journal/2016/12/furtheringfinancial inclusion-agenda-india.html

  • Gounasegaran, C., Kuriakose, F., & Iyer, D.K. (2013). Financial inclusion : Progress so far. Facts for You : Banking & Finance. http://www.efymag.com/admin/issuepdf/25-29_Financial%20Inclusion_Sep-13.pdf

  • Iqbal, B.A., & Sami, S. (2017). Role of banks in financial inclusion in India. Contadria y Administration, 62 (2), 644–656. https://doi.org/10.1016/j.cya.2017.01.007

  • Joshi, D.P. (2011). Financial inclusion and financial literacy (BI OECD Seminar). https://www.oecd.org/finance/financial-education/48303408.pdf

  • Kaur, S., & Pasricha, J.S. (2019). Problems faced by bank employees in implementation of financial inclusion schemes. Indian Journal of Finance, 13(12), 34–49. https://doi.org/10.17010/ijf/2019/v13i12/149267

  • Kline, P. (1999). The handbook of psychological testing (2nd ed.). Routledge.

  • Kotishwar, A. (2018). Impact of digitalization on select banks. Indian Journal of Finance, 12(12), 32–51. https://doi.org/ 10.17010/ijf/2018/v12i12/139890

  • Kuada, J. (2019). 12 - financial inclusion and the sustainable development goals. In, Extending financial inclusion in Africa (pp. 259–277). Elsevier. https://doi.org/10.1016/B978-0-12-814164-9.00012-8

  • Lee, C. - C., Wang, W. - C., & Ho, S. - J. (2020). Financial inclusion, financial innovation and firms' sales growth. International Review of Economics and Finance, 66, 189–205. https://doi.org/10.1016/j.iref.2019.11.021

  • Morgan, P.J., & Long, T.Q. (2020). Financial literacy, financial inclusion, savings behavior in Laos. Journal of Asian Economics, 68, 101197. https://doi.org/10.1016/j.asieco.2020.101197

  • Mukhopadhyay, J.P. (2016). Financial inclusion in India. Economic and Political Weekly, 51(49). https://www.epw.in/journal/2016/49/special-articles/financial-inclusion-india.html

  • Mushtaq, R., & Bruneau, C. (2019). Microfinance, financial inclusion and ICT : Implications for poverty and inequality. Technology in Society, 59, 101154. https://doi.org/10.1016/j.techsoc.2019.101154

  • NABARD. (2009). Annual report 2008–2009. https://www.sa-dhan.net/Adls/Microfinance/AR/Annual%20Report%202008-2009.pdf

  • Nandru, P., Anand, B., & Rentala, S. (2015). Financial inclusion in Pondicherry region : Evidence from accessibility and usage of banking services. TSM Business Review, 3(2), 1–14.

  • Ozili, P.K. (2020). Financial inclusion research around the world : A review. Forum for Social Economics. https://doi.org/10.1080/07360932.2020.1715238

  • Patel, R., & Patel, N. (2020). Impact of microfinance on women empowerment : A study from decision making perspectives. Indian Journal of Finance, 14 (8–9), 52– 68. https://doi.org/10.17010/ijf/2020/v14i8 9/154948

  • Planning Commission, Government of India. (2009). A hundred small steps: Report of the Committee on Financial Sector Reforms. https://www.ibbi.gov.in/uploads/resources/September%202008,%20Raghuram%20G.%20Rajan%20Committe%20Report%20on%20Financial%20Sector%20Reforms.pdf

  • Pradhan Mantri Jan Dhan Yojana. (n.d.). About PMJDY. https://www.pmjdy.gov.in/home

  • Rashdan, A., & Eissa, N. (2020). The determinants of financial inclusion in Egypt. International Journal of Financial Research, 11 (1), 123–136. https://doi.org/10.5430/ijfr.v11n1p123

  • Rastogi, S., & Ragabiruntha, E. (2018). Financial inclusion and socio-economic development : Gaps and solution. International Journal of Social Economics, 45(7), 1122–1140. https://doi.org/10.1108/IJSE-08-2017-0324

  • RBI chalks out financial inclusion strategy for 2024. (2020, January 10). The Hindu. https://www.thehindu.com/business/rbi-chalks-out-financial-inclusion-strategy-for-2024/article30537029.ece

  • Reserve Bank of India. (2008). Report on currency and finance 2006–2008 (Volume I). https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/86722.pdf

  • Reserve Bank of India. (2015). Report of the committee on medium - term path on financial inclusion. https://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/FFIRA27F4530706A41A0BC394D01CB4892CC.PDF

  • Sarma, M. (2008). Index of financial inclusion (Working Paper No. 215). Indian Council for Research on International Economics Relations. http://www.icrier.org/pdf/Working_Paper_215.pdf

  • Senyo, P.K., & Osabutey, E. L. (2020). Unearthing antecedents to financial inclusion through FinTech innovations. Technovation, 98, 102155. https://doi.org/10.1016/j.technovation.2020.102155

  • Sharma, D., Bhattacharya, S., & Thukral, S. (2018). Assessment of financial inclusive policy in Indian economy. International Journal of Ethics and Systems, 34(3), 304–320. https://doi.org/10.1108/IJOES-11-2017-0211

  • Singh, C., & Naik, G. (2018). Financial inclusion after PMJDY : A case study of Gubbi Taluk, Tumkur. SSRN. http://dx.doi.org/10.2139/ssrn.3151257

  • Sinha, D., & Azad, R. (2018). Can Jan-Dhan Yojana achieve financial inclusion ? Economic and Political Weekly, 53 (13). https://www.epw.in/journal/2018/13/money-banking-and-finance/can-jan-dhan-yojana-achieve-financial-inclusion.html

  • Subba Rao, K. G. (2019). All India Rural Financial Inclusion Survey. Economic and Political Weekly, 54(7). https://www.epw.in/journal/2019/7/commentary/all-india-rural-financial-inclusion.html

  • United Nations Capital Development Fund. (2006). Building inclusive financial sectors for development. https://www.uncdf.org/article/597/building-inclusive-financial-sectors-for-development-migration

  • Verma, Y., & Garg, P. (2016). Pradhan Mantri Jan Dhan Yojana (PMJDY) : A step towards eradicating financial untouchability. Indian Journal of Finance, 10(1), 56–64. https://doi.org/10.17010/ijf/2016/v10i1/85845

  • Yadav, P., & Sharma, A.K. (2018). An investigation into factors affecting access to financial services in farmers' suicide prone Bundelkhand region of India. Indian Journal of Finance, 12(6), 46–62. https://doi.org/10.17010/ijf/2018/v12i6/128135

  • Yangdol, R., & Sarma, M. (2019). Demand-side factors for financial inclusion : A cross-country empirical analysis. International Studies, 56(2–3), 163–185. https://doi.org/10.1177%2F0020881719849246


Abstract Views: 243

PDF Views: 0




  • Antecedents and Extent of Financial Inclusion : A Cross-Sectional Study

Abstract Views: 243  |  PDF Views: 0

Authors

Priyanka Tandon
Ph.D. & Independent Researcher, Motilal Nehru National Institute of Technology, Allahabad, Prayagraj - 211 004, Uttar Pradesh, India
Anurag Bhadur Singh
Associate Professor, Institute of Technology and Sciences, Ghaziabad - 201 007, Uttar Pradesh, India

Abstract


According to the latest study by World Bank on financial inclusion, globally 31% of people are excluded from access to formal financial services. But despite growth in account ownership, inequality persists. The objective of the present study was to examine the current status of financial inclusion and to further explore the factors leading towards the lower level of financial access among the households. The study was conducted in four districts of the National Capital Region in India namely, Ghaziabad, Noida, Gurugram, and Faridabad, with a sample size of 300 respondents between the period of 2018 – 2019. The study is unique in nature, as the survey was conducted both in rural and urban areas. The factor analysis technique was applied to explore a large set of variables into few factors affecting the financial inclusion. Further, the households were grouped into three degrees on the basis of their financial behavior and attitude. Finally, the study concluded that supply-side and demand-side factors were the main factors for the lower access to basic banking services. Furthermore, financial attitude, financial knowledge, and financial behavior were the factors shaping the minds of the respondents. The results revealed that majority of the respondents fell under Degree 1, that is, having access to banking products, but their level of financial literacy and active usage of bank accounts was significantly low. Therefore, it is concluded that though a sufficient number of people had a formal bank account, there existed a low level of financial literacy due to which they were not active users of financial services.

Keywords


Financial Inclusion, Economic Development, Financial Access, Commercial Banks, RBI.

JEL Classification : I3, O1, O16.

Paper Submission Date : April 13, 2020; Paper Sent Back for Revision : September 11, 2020; Paper Acceptance Date : November 12, 2020; Paper Published Online : March 15, 2021.


References





DOI: https://doi.org/10.17010/ijf%2F2021%2Fv15i3%2F158129