Determinants of Financial Inclusion: An Empirical Study on the Inter-State Variations in India

15 Pages Posted: 5 Aug 2013

See all articles by Natarajan Chithra

Natarajan Chithra

Bharathidasan University - Department of Commerce and Financial Studies

M. Selvam

Bharathidasan University - Department of Commerce and Financial Studies

Date Written: July 19, 2013

Abstract

The access to finance by the poor is a prerequisite for poverty reduction and sustainable economic development of a country. The importance of financial inclusion arises from the problem of financial exclusion of nearly 3 billion people who are away from the formal financial services across the world (Kempson Clarie, 2006). This paper attempts to measure the inter-state variations in the access to finance, using a composite Financial Inclusion Index (IFI) developed by Sarma (2008). This paper attempts to identify and analyze the determinants of financial inclusion. The analysis reveals the fact that among the socio-economic factors, Income, Literacy and Population were found to have significant association with the level of financial inclusion. Among the banking variables, deposit and credit penetration recorded significant association with financial inclusion. Finally, credit-deposit ratio and investment ratio did not have significant association with financial inclusion.

Keywords: Financial Inclusion Index, Literacy, Unemployment, Credit-Deposit Ratio, Investment Ratio

JEL Classification: E20, E40, G21

Suggested Citation

Chithra, Natarajan and Selvam, Murugesan, Determinants of Financial Inclusion: An Empirical Study on the Inter-State Variations in India (July 19, 2013). Available at SSRN: https://ssrn.com/abstract=2296096 or http://dx.doi.org/10.2139/ssrn.2296096

Natarajan Chithra

Bharathidasan University - Department of Commerce and Financial Studies ( email )

Tiruchirappalli, Tamil Nadu 620024
India

Murugesan Selvam (Contact Author)

Bharathidasan University - Department of Commerce and Financial Studies ( email )

Tiruchirappalli
Tamil Nadu
India

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