For measuring a relationship between financial inclusiveness and growth, what type of model may be used?
For working purpose,we may make it very simple.No of households having savings account and accessing credit .
variable for measurung financial inclusion may be:
no of branch /1000 sqkm
no. of branch per 100000 people
no. of bank ATM per 1000 sqkm
no. of bank ATM per 100000 people
no. of loans per 1000 peoplr
average size of loan to GDP per capita
numper of deposit per 1000 people
credit/deposit ratio
average size of deposits to GDP per capita
In simple terms, the critical variable to measure the financial inclusion is, access to savings and access to credit by the low-income groups.
A way for measuring the financial inclusion is by using a Financial Education model. I think financial education has many variables that can be used. In this moment I am doing a research from a bank of the public sector that pays wages to all employees from Public sector and offers financial services in towns where there is not bank. Perhaps you are interested in exchange information
sir, i would like to know determinants of credit rationing in the context of different states in india. I need data regarding credit rationing.
Credit rationing is related to the repayment capacity of the borrower. In other words, it is about the income of the borrower.
The article "Measuring Financial Inclusion: An Axiomatic Approach" by Satya R. Chakravarty and Rupayan Pal of
Indira Gandhi Institute of Development Research (IGIDR) is a good document,one may refer to while deciding on the variables of financial inclusion.The article is now available on line @ http://www.igidr.ac.in/pdf/publication/WP-2010-003.pdf
Financial inclusion basically looks at bringing the unbanked people into the banking fold, so that they have access to institutional credit and other services offerd by banks, which eventually leads to empowerment and opportunites for economic growth with social security at the individual level.
Please see ssrn.com for a paper (co-author) of mine dealing with designing a methodology to study financial inclusion
Savings, Foreign Investments, Exchange rate with logit regression.
You may consider total deposits as a percentage of GDP as one variable while another might be deposits to saving ratio
For working purpose,we may make it very simple.No of households having savings account and accessing credit .
Dear Sujan,
The following links may helpful for financial inclusion:
http://www.mse.ac.in/seminar/19Sept-MSE.pdf
http://www.icrier.org/pdf/Mandira%20Sarma-Paper.pdf
http://ifmr.ac.in/cmf/news/26_Ramji_Financial%20Inclusion%20in%20Gulbarga.pdf
Best,
Vijay
Eventually, financial inclusion covers two major aspects, namely, (a) spread of financial knowledge to hitherto financially inaccessible areas and (b) changes in policies and procedures that enable the deprived sections of people to avail of financial benefits, efforts on both fronts will eventually result in increased volume of financial transactions. Please refer to Reserve Bank of India's Monetary Policy Reports in recent years on financial inclusion. The RBI's efforts at improving monetary policy communications through e learning of central bank functions for school children is an example (refer RBI website).
As far as identifying the variables is concerned, it is somewhat difficult. One can use a dummy variable after identifying the year that brought about a marked change in policy relating to financial inclusion.
Dadhirao. Anjaneulu
Hello!
As an aspect of financial inclusion I understand access to the financial system for every citizen. I used variables such as number of bank cards issued, number of ATM-and POS - terminals, cash accounts opened, number of bank branches and 1,000 area or residents=
Thanks everyone for giving me suggestions. However, i just make a model for analyzing relation between inclusive growth and inclusive finance. I use johansen congregation test.
You can use M3 to GDP ratio as a measure of financial depth of an economy
In addition, percentage of households investing in financial markets (stock market) should also be included.
Dear Sujan, I think your research is quite interesting, when we talk about inclusive growth we need also to talk about financial inclusion.
I suggest you to search this issue on the OECD website, because the OECD is one of international forum that concern to explore this issue. Bellow is just a little part I found from the OECD.
https://www.google.com/url?q=http://www.oecd.org/daf/financialmarketsinsuranceandpensions/financialeducation/41630750.pdf&sa=U&ei=OcHBUOKwLpCfmQWvuYHACQ&ved=0CAkQFjAB&client=internal-uds-cse&usg=AFQjCNF3IP_8QmXrEzcocWbCd5EOkWKAcg
You can use M3 to GDP ratio as a measure of financial depth.you can also make a dummy for the purpose of analysis
Mexico has developed a nice set of indicators for financial inclusion (spanish only), check this annual report: http://www.cnbv.gob.mx/Prensa/Paginas/Inclusion.aspx
One important variable is the education(finacial education). Others are no. of accounts, no. of deposits, no. of rural bank branches, etc
I think it is important to consider the financial fragility of families. Once doing this it is important to separate financial fragility from poverty. so it is important to consider the way a family deals with unpredictable expenses more than daily events. So,to measure financial inclusion it is important to implement methods that people use to deal with shocks. This work http://www.nber.org/papers/w17072 deals with the topic.
Most important variable is wealth index including household each members monthly or annual income. Multivariate analysis in a form of odds ratio is a best model to measure with financial situation.
Household access to financial institution in form of saving account, loan and stock market that is the best way to measure the financial inclusion.
I agree with Sunits Sanguri that education is an important factor to measure financial inclusion since it directly measures literacy rate, which is essential for inclusive growth
I would consider the use of credit and debit cards and how their use changes when considering household income. You can also see the acceptance of credit cards or the existence of banks' branches in low income neighborhoods
Well I think that all you have correct commment, so I would like to add that with a approach DEA one can to measure the productivity and efficiency of the financial as inclusion variable in any model.
As suggested by Natalia Melgar, credit card no doubt could be a measure of inclusive growth. However, credit card usage will come into picture only after ascertaining the income threshold level that is required for sustained livelihood, and whether the inclusiveness provides such an income level.
I am acoording with Ghorpade, so I think that credit card usage depend of your personal plan, however the cost asume for this financial is the ascerting point for this consideration. For this case I am insisting to use the aproach DEA for measuring the financial inclusion.
On the basis of earlier discussion we can say that access to financial services may be the important variable for measuring financial inclusion
Now is common to use the environmental variable, other use metereological variables, so it depend of the model that resercher define for your researching.
According to my knowledge, a good number for measuring this is to compare the population (adults) of the country with respect to the number of clients banks have. Theoretically, the more developed the financial system is, the more this ratio gets near 1.
Bear in mind that it is a proxy, because one person may have more than one account, for instance. That happens in microfinance.
Regards
Gustavo Concari
Yes, as suggested by Gustavo Concari client base in bank is a visible measure. We should also try to understand and measure the turnover of these accounts, and try to equate it with the per capita income levels.
You can use following source of information for knowing FI indicators
http://www.afi-global.org/sites/default/files/afi%20fidwg%20report.pdf
How does one measure the 'level or maturity' of financial inclusion within a bank's customer base. All of them have gotten an account, but they might be at different level of inclusion nonetheless..
I understand that how much time they are in the system could be one answer. What is generally measured and is very important in MFI is that the people served pay on time their debts. That means that they are financially included because they follow financial systems rules.
Regards
https://www.researchgate.net/publication/287162366_Transaction_Banking_Services_The_Case_of_Bangladesh?ev=prf_pub
Book Transaction Banking Services: The Case of Bangladesh
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