Financial Inclusion Index: Result from a two-stage Principal Componant Analysis

Abstract

The objective of this paper is to rank country’s financial inclusion. We perform two-stage principal component
analysis to calculate index for financial inclusion and its three dimensions. We find that developed countries
have higher and more stable level in overall financial inclusion and its three sub-indices. Borrowing and saving
dimension accounts for the highest proportion in explaining the variation of financial inclusion, followed by account
and payment although the difference between the three is quite low. To improve overall financial inclusion, policy
makers should make progress in all three dimension simultaneously and sustainably