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Defining and measuring financial inclusion: A systematic review and confirmatory factor analysis
Author(s) -
PesquéCela Vanesa,
Tian Lihui,
Luo Deming,
Tobin Damian,
Kling Gerhard
Publication year - 2021
Publication title -
journal of international development
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.533
H-Index - 66
eISSN - 1099-1328
pISSN - 0954-1748
DOI - 10.1002/jid.3524
Subject(s) - financial inclusion , confirmatory factor analysis , construct (python library) , inclusion (mineral) , econometrics , meta analysis , financial analysis , economics , actuarial science , finance , financial services , psychology , statistics , structural equation modeling , social psychology , computer science , mathematics , medicine , programming language
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.