Determinants of Financial Inclusion in South Asia: An Empirical Evidence

Abstract

Currently, financial inclusion is considered a key mediator in achieving economic output. The primary aim of the current research is to construct a financial inclusion index and examine the different factors that affect financial inclusion in the context of South Asian countries. The time period of the study is 1980 to 2017. The financial inclusion index is used as a dependent variable that is computed based on access and usage of financial services. Independent variables include GDP per capita (GDPP), age dependency ratio (AGE), urbanization (URBAN), information and communication technology (ICT), and rule of law. A fixed effect model is used for regression analysis. Regression results indicate that, in South Asian countries except for urbanization, all the other variables play a significant role in the process of financial inclusion. Thus, governments of these countries should chalk out such policies which can provide the modern technology related to information and communication, improve the rule of law conditions, and increase the GDP per capita.